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2021 has seen the Australian property market soaring. In the 2020-2021 financial year, average property prices rose by over 16.8%, and by more than 6.7% over the April-June financial quarter in 2021. Source: Australian Bureau of Statistics 2021. Overall, Australian property prices have risen the fastest in 32 years.  

With prices soaring not just in major cities, but in just about every region of Australia, the pandemic has produced an unprecedented market boom due to its coverage of almost every property market, segment and category across the country.  

Even if you can’t buy your dream home right now, buying an investment property you can rent out, negative gear, and potentially get a good return on, could help you grow your money so you can buy the perfect home in the perfect suburb later. 

It’s definitely a seller’s market, and buyers are up against steep competition as they face high demand for a limited amount of properties on the Australian market. If you’re currently thinking about buying your next home, here’s five key questions to ask yourself first:

1. Can you genuinely afford buying a new home right now? 

During this boom in house prices, properties are often selling for well over the asking price - sometimes by hundreds of thousands. Prospective buyers are forced to dramatically increase their budgets if they intend to buy, or reconsider what this means they can actually afford. 

Think carefully about whether you can afford to purchase your next home right now. Have you built up enough equity in your current home? Are you prepared to increase your budget to pay for the home you want? 

2. Will this new home fit in with your long-term plans?

There is a tendency for buyers to rush in when the property market is hot out of fear of missing out (FOMO). But buying a new home (and taking out a new home loan) must also fit into your long-term goals, which can be challenging during a pandemic. 

Suppose you are currently remote working from home and realise you need a home office. If you decide to eventually return to the office full time and find you have overpaid, what will happen? If, however, your company decides to implement remote working permanently, would you then be able to relocate further out of the city (since you no longer have to commute)? 

You might be better off holding off on buying a new home if you’re not certain or feeling unsure of how it fits into your long-term plans. 

3. Are you ready for potentially higher mortgage repayments?

There are fears that Australian buyers may be taking on larger mortgages than they can afford as house prices continue to rise. With Australian home loan interest rates expected to begin rising again in the near future, borrowers can potentially be taking on bigger mortgages than they can manage. 

Australian home loan interest rates are at a record low at the moment, but they will inevitably begin climbing up again in the near future. You may be able to afford a mortgage at a rate of 2-3%, but would you still be able to afford repayments if the rate suddenly doubled? 

If you are paying off your home loan at a higher interest rate than expected, your lender will factor that into the calculation of how well you can repay your home loan, but you should still think about it from your end. 

4. Have you considered all the pros and cons of buying? 

It is never 100% guaranteed that you will make a profit on your home’s sale, but when you buy in an upward market, you are potentially at a greater risk of overpaying for a property that will then fall in value when the market eventually turns around.  

5. Will you buy or sell first?

If you plan to buy and sell in the same property market, you should decide what your home loan strategy will be. It is not a new dilemma for Australian home sellers to decide whether to buy or sell first, but in the quickly booming property market, they may have been caught by surprise and pulled up short.  

There are times when buyers may be forced to decide whether to sell first and take advantage of high demand and rising property prices, or buy first and sell because they are potentially worried about being unable to buy back into a rising market.  

Ultimately, the right time to buy is always up to you, but it’s always worth making sure you’ve asked yourself the key questions and taking all factors into account when making your property decisions. 


Disclaimer: This article is not intended as legal, financial or investment advice and should not be construed or relied on as such. Before making any commitment of a legal or financial nature you should seek advice from a qualified and registered Australian legal practitioner or financial or investment advisor.