Is 2024 the Year to Buy Property?

On the 19th of March the RBA left the official cash rate unchanged. The current official cash rate as determined by the Reserve Bank of Australia (RBA) is 4.35%.

In 2023, homeowners and hopeful first-time buyers encountered notable shifts. The Reserve Bank of Australia (RBA) raised the cash rate from 3.10% to 4.35% over eleven months in an endeavor to manage inflation. RBA data revealed an uptick in the average home loan rate for existing loans, climbing from 5.46% to 6.71% annually. Based on the average Australian mortgage of $599,000 on a 25-year term paying principal and interest, that equals an additional $459 per month simply to service the mortgage (from $3,661 to $4,123 per month).

For first-home buyers, the average time to save for a 20% deposit has increased to 4 years and 9 months, according to a recent paper by the Australian Housing and Urban Research Institute Limited, with the national ratio of median house price to median income now sitting at 8.5.

Though this reality poses challenges for many Australians, there is optimism for the year ahead. While the precise trajectory of inflation, the cash rate, and consequentially interest rates remains uncertain, there are promising indicators.

  • The RBA will meet only eight times in 2024 to determine whether to move the cash rate, down from the eleven in 2023, suggesting potentially fewer rate adjustments throughout the year. The first announcement for 2024 was in March, with next cash rate announcement will be 7th May 2024.
  • Economists from the Big Four predict the cash rate is at, or near, its peak. Some predict at least one more rate hike in 2024 and rate cuts likely not happening until at least December.
  • Despite predictions of a decline in house prices in 2023, they have actually continued to increase in most areas around the country. This could be good news for refinancers in 2024, as they could find their home equity has increased.

Despite potential challenges, 2024 presents a promising opportunity for entering the housing market. Here’s why:

  • Savings interest rates are on the rise: As the cash rate increases, savings interest rates typically follow suit. This can accelerate the process of saving for a deposit, making it more achievable for aspiring homeowners.
  • Owning may be more affordable than renting: According to PropTrack data, purchasing an apartment has become more cost-effective than renting one in many capital cities over a ten-year period with a 20% deposit. In fact, approximately one-third of properties nationwide are now cheaper to buy than rent.
  • The First Home Guarantee has expanded – in 2023 the eligibility criteria for the First Home Guarantee, Family Home Guarantee and Regional First Home Buyer Guarantee was expanded, enabling eligible buyers to get into the market sooner. This means if you have a 5% deposit (or 2% if you are a single parent or guardian), you may be able to use one of the schemes to purchase property without paying lenders mortgage insurance.
  • Introduction of the ‘Help to buy’ scheme – the federal government has announced plans to rollout a new scheme that will help up to 40,000 eligible buyers with as little as a 2% deposit get into the housing market with lower repayments.

If 2024 is the year you want to purchase your first home, come and have a chat with our friendly team. We can help you develop a plan, determine your borrowing capacity and get you on track to achieve your home ownership goals.