Timing Your Purchase – When Is A Good Time To Buy?
There have been many predictions that the housing marketing will go down in 2022 or 2023(1). Unfortunately, these predictions have left many people in the market for a family home in holding patterns, looking to time their purchase at the point when the market is at the bottom.
But is this the best way to approach buying your family home? What are the considerations, and how do you work out the best time to buy your perfect new home?
Market predictions and commentary.
At the beginning of COVID-19 in 2020, it was predicted that the market would crash. It didn't. At the end of 2021, it was predicted that the market would crash. Three months in, and this prediction has been revised to likely 2023. In the meantime, families wanting to purchase have missed out on two years in the market in their ideal family home while waiting for the right time to buy. Predictions are often wrong, and timing the market is hard, even for the experts. If you are in the market for a family home, more considerations potentially outweigh waiting for the 'predicted' drop in the market.
Peaks and Troughs are not what you should be focused on
The peaks and troughs of the property market are misleading as they don't speak to the actual value of your home, found from long-term growth. Over ten or more years, the property market will experience many peaks and troughs. The graph below from the Australian Bureau of Statistics2 shows the market fluctuation over ten years to September 21. You can see that there are many ups and downs, but there has been significant growth over the entire period, which smooths out any loss of 'buying' at the peak of a cycle. Property, by its very nature, is about long term investing, and if you are buying a family home that you will live in versus an investment property, this is even more so the truth.
According to Statistica(3), the average length of homeownership in Australia is 14 years, making the argument to 'time your purchase' less compelling. However, suppose you were after more comfort in the long-term view of the property market. In that case, the graph below from the RBA(4) demonstrates a much longer time frame and how the market, while again experiencing ups and downs, moves in a constant upward trajectory.
There's no place like home.
As a home buyer (rather than a professional property investor), your home is more than an investment. It's your shelter and place to raise a family. It is about providing you with comfort, warmth and security and should be a place that helps you live your best life. If you are attempting to time the market, you are risking missing out on finding purchasing your perfect home. Further to this point, is waiting for two, three or more years for a market trough worth the time lost, particularly if you have a growing family? This argument is much more emotive than economic. However, the Organisation for Economic Co-operation and Development (OECD) provides context to this point. In its global report on wellbeing(5), housing is included in the 11 topics identified as essential in the areas of material living conditions and quality of life.
In summary
Trying to time the market to purchase your family home presents several real issues. The market predictions are hard to get right, and the media beat up over peaks and troughs often introduces arguments without the proper context for the home buyer. Over the long term, the growth comes from the time in the market that provides gains for the home buyer, and the average Australian family will stay in their home on average for 14 years. There is also the opportunity cost of living in a home that truly suits your family and how you want to live. The saying "There's no place like home," (6), seems to ring true, particularly if you are looking to buy the perfect home for you and your family. At the end of the day, the best advice is to buy when the time is right for you and you have found the perfect home to suit your family.