Should I buy a house now or should I wait until 2025?

The process of buying a property, whether as a place for you to live or as an investment, is a complex one. It’s not just about finding the ideal house or unit – you’ll also need to consider questions like how much you can afford to borrow on your salary and whether to seek out home loan pre-approval, to make the process more seamless. You may even consider working with a mortgage broker to help find a lender that’s suitable for you.

A broader question, though, is whether it makes sense to buy a house now, or wait until market conditions change, perhaps until forecast interest rate cuts happen in 2025, and banks lower their home loan variable rates. If you’re currently pondering this, then these are some considerations that may help you decide.

Should I buy a house now, or wait?

“Getting a foot on the property ladder is no mean feat, particularly for those aiming to go it alone on just one income,” says Canstar’s Data Insights Director Sally Tindall.

“Most of these would-be first home buyers have long ditched any hope of buying a property that comes with a patch of grass – they’re squarely focused on units and even then, it’s a pretty hefty ask.”

“The latest Core Logic data shows the median apartment price in Australia is over $660,000,” Tindall adds. “Even if a buyer managed to cobble together a 20 per cent deposit, which is a pretty impressive feat in itself, they’d still be looking at a loan of over half a million dollars. That’s a gigantic amount of debt for anyone to take on with just one income.”

“If you can’t get a successful bid in, consider turning back to the drawing board to work on a plan B. This could include making the difficult decision to look at buying further out from family or work, or buying an investment property that you can rent out for the first couple of years, particularly if your parents are in a position to give you free lodgings for a while.”

So is now a good time to buy a house? “While a drop in mortgage rates will see people’s maximum borrowing capacity increase, there’s no guarantee this will make entering the market any easier because property prices could climb even higher on the back of nation-wide rate cuts.”

“For example, for someone earning the average full-time wage with no dependents, no debts and minimal expenses a 0.25 percentage point rate cut from the RBA could see their maximum borrowing capacity increase by $11,800, according to CBA’s calculator.”

“A total of three standard RBA cuts could see their borrowing capacity increase by a total of $36,800 on the same measures.”

“The problem is, most home buyers’ maximum borrowing capacity will lift on the back of RBA cuts. What you want is an edge, not the same leg up as everyone else at the auction because if there’s enough demand for the property, the biggest winner at that point is likely to be the person selling the property, not buying it.”

“You can get a jump on your competitors by shopping around for a decent-priced loan because when it comes to how much you can borrow from the bank, interest rates matter, and why not get a rate cut before you even own a home?”

Are house prices going up in Australia?

According to the most recent CoreLogic data, the Australian property market appears to be “cooling”, which could be good news for prospective home buyers. The past several years have seen significant growth in the value of houses. According to CoreLogic’s head of research Tim Lawless, house values in Australia’s major cities rose by 33.9% in the four years to January 2024, and unit values surged by 11.2% in the same period.

Recent data indicates, though, that these rapid rises may be behind us for now. CoreLogic figures show that the September quarter of 2024 had the slowest quarterly growth in house values since March of 2023, with the annual growth rate slowing to 6.7%. House prices in the nation remain significantly higher than they were five years ago, but the slowing rate of house value growth could present a glimmer of hope for buyers who are hoping to get on the property ladder.

What is the average new mortgage in Australia?

Even though house price growth in Australia appears to be slowing for now, the average mortgage size is still considerably larger than it would have been even a decade ago. How much would you now need to borrow to buy an average house? According to the most recent Australian Bureau of Statistics lending indicators, the average home loan in Australia is now $636,208. In August 2014, per ABS statistics, the average mortgage was just $362,769, which means the amount that the average Aussie borrows for a home has risen by close to $275,000 in the past ten years.

What is the big four banks’ cash rate forecast?

If you’re wondering “is now a good time to buy a house?”, you’re likely concerned with the movement of interest rates. Economists at the big four banks are presently predicting that the cash rate will be cut in early 2025. When the Reserve Bank of Australia (RBA) raises or lowers the cash rate, banks and lenders tend to raise or lower their own home loan interest rates by an equivalent amount. With a predicted cash rate cut on the way, Australia’s home loan lenders have already begun to cut rates on some two and three-year fixed home loans, and it’s likely that we will see variable rate cuts in the months to come.

When do the major banks predict that the cash rate cut will happen, and what is their cash rate forecast? At the time of writing, economists at CommBank updated their prediction that we may see the first cut to the cash rate in February 2025, rather than December 2024. This falls in line with economists at ANZ and Westpac that both anticipate cuts in February 2025, along with NAB, which also recently updated its forecast cut from May to February 2025. Though with recent jobs data showing healthy employment figures around Australia, it’s possible cuts may be coming later rather than sooner, as the RBA may decide to hold the cash rate where it is to keep combating inflation.

What should you consider before buying a house?

“Getting your first home loan doesn’t have to be as intimidating as it sounds, but it does require research and preparation,” says Canstar Data Insights Director Sally Tindall.

“The better you understand the process before you start, the more confident you will be in making important decisions along the way. You’ll also know when to question any rates and fees that seem unfair.”

“The first thing you need to do is work out how much you can borrow from the bank, but also how much debt you’re prepared to take on.”

“A mortgage broker is a fantastic place to start, but also take the time to do some research yourself online. To do this, you’ll need to have the answers to a range of key questions – are you buying a home to live in, or is it an investment property? Are you happy making principal and interest payments? Do you want an offset account? It’s worth researching these terms beforehand so you’re comfortable following all the jargon.”

“Don’t forget to include the many additional costs that can come with buying a property, such as stamp duty, unless you’re eligible for an exemption, lenders mortgage insurance if your deposit is under 20 per cent, legal costs, valuation costs, government fees, application fees and home insurance.”

“You’ll also need to get your house in order by collecting key documents such as payslips, bank and savings account statements and details of any debts you have, even if it’s a completely clean credit card.”

“Often when you apply for a home loan, the lender will offer you pre-approval, also known as approval subject to valuation. Pre-approval will help give you confidence to put in an offer on a property or a bid at an auction. While it’s not an iron clad agreement between you and your new lender, it is a step that’s well worth taking.”

“This whole process can take a number of weeks, if not months, so make sure you have your deposit at the ready in a safe, but productive place. That’s usually an at-call savings account where you can add more funds into it as you are house hunting.”

Is the housing market going to crash in Australia?

The likelihood of a housing market crash in Australia is “very low” at the present time, so this is not something that potential property purchasers ought to be concerned with. According to property expert Michael Yardney, the Australian housing market is currently resilient. This can be attributed to several key factors, including:

• Stable interest rates, which are thought to have peaked after a year of consistent rate rises in 2022-2023
• A shortage of supply in the housing market, meaning that more is no shortage of buyers for the houses that are available
• Minimal levels of mortgage stress for borrowers, meaning that those who are currently paying off mortgages are not being forced to sell

In order for there to be a housing market crash in Australia, Yardney says that there would need to be a “severe recession” with many people forced to sell their properties, and nobody to purchase them, meaning that they would need to be put on the market for a very steep discount.

Cover image source: Dragana Gordic/Shutterstock.com