The saying ‘as safe as houses’ has always appealed to me. Not only does it suggest the relative security of investing in physical bricks and mortar as opposed to say, shares, but also a more fundamental element of comfort.
Our homes have become even more valuable of late haven’t they, as we look for safehavens – another comforting term – amid the current uncertainty of the outside world. I suppose in recent years, it’s why people have been putting so much value on securing their very own safehaven – no matter the cost! We know that in large capitals like Sydney, some buyers will not be thwarted and consequently, some final purchase prices exceed the perceived value.
But can you put a price on a home?
Perhaps not. At least not on your own home, where the value goes beyond the cost of bricks, mortar and even the land it sits on. Your home is what you make it, as someone wise once said.
All these phrases are well and good if you can afford to enter the property market. Entering the market was just a given in our parents’ day – it was something they could do on a modest salary and without too much competition. But of course times have changed, and the simple message of safety in houses has spread around the globe and interest in this idea has surged. It’s benefited many but also made competition far tougher than maybe it should be.
From Hollywood to Sydney’s shore, home prices surge
A recent report by property consultancy Knight Frank says that “urban” house prices around the world are rising at their fastest rate since 2007 right now. Of the 150 cities they track, 43 are now registering annual price growth above 10%, Knight Frank reports.
In an era when property talk dominates our news headlines and dinner table conversations, this might seem normal. But that level of growth really isn’t normal. Sure, if you look at ten year intervals of price growth in any major city, there’s usually a significant jump. The real issue is that doubling prices, which is often what the stats show, isn’t sustainable every ten years.
Take any big city, like Los Angeles: the median sales price there way back in 1970 was about $24,000, give or take. It’s now more than 30 times that price and has risen by 25% from May 2020 to May 2021 alone, equating to a $775,000 median, roughly.
Why? Well, as we know, LA is a highly coveted place to live, like Sydney, and also boasts homes that are often sought after by international investors. You could point to Wellington, San Francisco, London, Istanbul, Geneva, Shanghai or Melbourne as similarly popular markets with over the top prices.
FOMO and low home loan rates set the scene
According to Knight Frank, the fear of missing out (FOMO) remains a primary reason for the rush on property. And the fear of missing out is surely exacerbated in the endless sharing of information across social media channels.
Another reason for continued surging prices is that some buyers are looking ahead, keen to lock in to a lower home loan rate before broader interest rates start to really shift higher. We’ve discussed that a bit on our site. In short, nabbing a lower home loan rate has become crucial to the whole exercise, at least to minimise the overall hit to your bank balance.
Lastly, some people have been saving large sums of money during the pandemic, stashing away what otherwise would have been spent on holidays or even dining out. Knight Frank suggests that as a result, a second home may now be within reach for some.
All of this reiterates what many of us have long concluded: for those already in the market, property is both a safehaven of comfort but also an investment. But for those on the outside looking in, investing in property may seem far more elusive. There’s no easy way to overcome the hurdles of getting in, perhaps not without some financial assistance.
Still, tried and true tactics are your best bet – that is, putting yourself in as good a financial position as possible.
More specifically, this means:
- Reigning in your spending habits
- Opening a savings account
- Targeting a first deposit amount.
These steps won’t guarantee you the money you need to get into an expensive property market. But perhaps it’ll give you a chance to enter a smaller, less competitive market where prices aren’t escalating so quickly and where competition isn’t as fierce.
There are a few more steps to securing a home in 2021, for sure. But property markets also move in cycles, where prices escalate one year but then can stagnate the next. It happens, we have years of data to support this. It might be cold comfort to would-be buyers, but taking your time to research, find the right home loan and indeed the right home, might be a better strategy than being swept up in the fear of missing out.
For more tips on how to save for a mortgage or to view some home loan options, visit our Home Loans Hub.
Originally Appeared Here