Australian First Home Buyers & Upgraders:Is this the right time to Buy Property?

Parag Dixit0:02

Hi, hey Madhuyam. Very good. How how you been?

Mudit0:05

I've been well. Been well. This this has been pretty interesting times. This year has been so much different than in in a lot of lot of ways. There's been so much happening in terms of the economy, in terms of inflation, the interest rates, then legislation changes, and then on the on the other side, which is on the supply side, there's been limited supply, and people are vendors are confused about whether they should we should they should sell now or not. There's been very very kind of especially after the legislation changes, it's been quite a different market. It's

Parag Dixit0:37

a very big smack market. People are some people are trying to find opportunities. Some people are saying this is not the opportunistic time. Some people are scared. Some people are anxious. It's a whole mixed bag which is coming through, and everything is now, right now. It's it's upon people. You know, it's the way they're taking it, the way they're looking ahead, it's the way they are managing their aspirations. And some are thinking that aspirations are dead. Some are thinking that we've still got some room ahead for ourselves. So it's it's a pretty mixed market, right?

Mudit1:08

Absolutely, and and also across cities. I mean, capital cities versus let's say capital and significant urban areas versus regional cities. It's been kind of two-speed market where there is different things happening in different markets. No, I think let's let's dive down a bit deeper into that today. That given the way the market has shaped up this year, how are people finding it? And let's, I mean, there are of course different kinds of investors: people from who are looking at property, people who are looking to buy their own house, or people looking at investment primarily. We know that there's we have spoken about investors today, let's focus a bit more on the people who are looking to buy their house. Now, this can be either yeah the home buyers, either the first home buyers or people who are looking to upgrade. Yeah, and how the market today? What should they do? What are the main risks? How do they mitigate? How they how do they navigate and and move forward?

Parag Dixit1:56

Yeah, yeah. There's a there's a lot of confusion or maybe a lot of fear in the market right now. You really don't know whether I should buy, whether I should not buy, whether I should wait, whether it should I'm losing out an opportunity or there is more opportunities ahead. Nobody wants to catch the falling knife. You really don't know whether I'm buying at a wrong time or I'm not buying at the right time. So all of these kind of mixed emotions going through.

Mudit2:20

And when we are having these discussions with people that we are talking to on a daily basis, right? So, so if we talk about the key things, I mean, demand, supply. First thing, right? So, in terms of demand, the market, I think, it has become much more volatile this year. There's been especially the overall inflation, overall interest rate scenario because of the wars happening, so many things happening across the globe, which is directly impacting whether we we see direct impact or indirect. But it is it is impacting everybody's expenses, everybody's how we look at interest rates and mortgage repayments. That is one part of it. And second is the tax legislations which came recently. It has kind of made people think in a very different way with the negative gearing way changes, capital gains tax changes, SMSF, which has been a big change again, and and this month was all about SMSFs.

Parag Dixit3:09

Yeah, yeah, absolutely right. You know, it's it's a bit of a scary time because the uncertain uncertainty kills it. You know, you if you know what's going to come up ahead, you really know what you can do. But if you don't know what's going to come up ahead, you don't know. There are government regulations changes which are happening every second week or something. You know, you hear a news and and there's more news which is coming and there's more political stuff which is going to change. There's elections coming in various states and there's elections coming in Victoria which is coming up in a few months, and then people are looking at what's going to happen there. People looking at what's happening in the federal tax changes. People are looking at how is it going to impact my living cost. How it could impact my and the cost of living thing is is pretty much on everyone's head. They really don't know whether inflation is going to go up. The war continues and stops and continues and stops, and then you really don't know where interest rates are going. Sometimes it was well tracking along for a decrease in interest rates, and suddenly this war thing came on everyone, and now the rates have gone up. And then we are still again looking at okay, maybe they can just stabilize, but then again, it's going to the war started again. So really don't know which way it's going, and that's the biggest biggest problem with the demand, and that's why you see that there's auction rates which have gone down. You're seeing that the actual volumes of listings have gone down. Spring is now just about to come, and before and when it's going to come, we don't know what volumes will be there. But it the way it looks like, people are holding on. If you can hold on to a property, you really don't want to sell with a with at a lower price or or the vice versa. You know, this if you you want to buy but you can't find a good one now.

Mudit4:49

Yeah, absolutely right, absolutely right. Although although I mean, there the government support still remains there for the first home buyers. There are initiatives there, and then especially buyers. There is less pressure on buyers right now in today's market because it's not the market is not rising fast as it has been in a lot of last years. But as you rightly said, supply the vendors that's where that's another challenge on the supply side. A lot of people are like, should I sell right now? The supply is getting limited because people are like a lot of people are wanting to wait and see that where does it go because there's in especially in capital cities there's a there's a property prices have gone down a bit 5% 7% 10% somewhere in that range so vendors are more open to negotiations and which also presents an opportunity for buyers

Parag Dixit5:33

yeah absolutely right yeah it brings an opportunity to the buyers because vendors who wants to sell he he wants to sell and they know that the selling times have increased. They know that the time to market has increased. They know that they may not find the right buyer again in some point of time. So they want to grab an opportunity what they can. This brings a benefit to the buyers, and it's become a more biased market mostly across Australia, and especially in the higher price segment. That's impacted a lot, and that's where the whole game's changing more towards the buyers, and that's a good opportunity there for people to have

Mudit6:06

somebody somebody who's a first home buyer. Now they are able to see that there is less competition at open homes, so that's the queues which used to be there. Now there are much smaller queues. Just real estate agents are selling that in the open houses they are getting just one or two people, one or two families. So that has reduced the competition, and so negotiation power has gone up for the buyers. It's a, it's a from that angle, yes, it's a good time to buy. But of course, the uncertainty still remains. And same way, parallelly for for the upgraders, this is probably even better situation because the higher price properties they have seen a more decline in terms of the value compared to the smaller, the lower price properties. So the gap helps them buy a a premium property, even if they have to sell theirs, probably at a better rate.

Parag Dixit6:54

Yeah, absolutely right. You need to really understand the selling versus buying costs, and then you also need to understand the benefit which you are getting. If the arbitrage between the selling versus buying cost and the price gap and the benefit gap is is towards the benefit, then it makes so much of sense for an upgrader to say, okay, let me sell in today's market. I can buy and sell in today's market, and I'm still going to make a lot of money, and it's going to give me a benefit about okay, I will be able to get a property which is a significantly upgraded property, but the net outflow from my pocket or the loan which is going to increase is not proportionately high. So I'm better off, and that's that's the thought which a lot of upgraders are going through right now. It's just that the process is bit of a thing which is becoming a stickler in the sense that you really need to understand is it favorable for me to be able to sell and there's a lot of questions which come through for people that because if if see if if I'm a if because if it's a lot of segments of people which are there so if I'm a particular person who is well prepared you know I've got a lot large borrowing capacity there with me. I've got a stable income. I know my job's not going anywhere. I've got a good deposit. I don't need to take equity and so on and so forth. Then, then I'm into a pretty good situation, and I'm saying, okay, I want to jump in. I I know there's lesser competition. I know that vendors are wanting to sell. I know the street or the area where I want to buy, and I know there's a property which is listed there, or the couple of properties which are interesting to me, another maybe the school catchment or maybe the office area, whatever it's it's attracting me and I am well prepared. Now this kind of buyer, you're in it, right? You're you're in for a good killing. You're in for making good money out of it. But if I'm not, if I'm on the other side of the spectrum, and I'm there, which I don't really have. My incomes are, you know, I'm not sure. I'm I'm in this kind of job segments, which which is not sure. So I I wake up thinking whether I'm going to go to be employed today or not, or maybe I'm I don't have too much of a buffer, don't have too much of a deposit. I want to buy something, but I don't have that much of cash available with me, and I'm uncertain. My deposit's not there. Then I'm I'm I'm in issue. My living costs are kind of on the edge. I'm into an issue. I I know there's an opportunity, but I I'm so uncertain that should I take the risk or should I just hold on or should I go ahead and should I find a way or should I sell and what if I sell and I can't buy? What if I sell today and I'm and the rates go up again, and then my borrowing goes down further, and suddenly I don't have a house I'm renting now, and I've sold what I had. So I'm out of. I'm in worst of both the world. No,

Mudit9:35

absolutely right. No, you are very rightly. I mean, a lot of although if you look at the unemployment data, it has it. It used to be in the 3.7 or eight somewhere a couple of years ago. Now it has stabilized more around four and a half percent. This year it has been more stable around that. But still, that fear of the job risk is there in a lot of people's mind, and especially depending on certain sectors. So somebody who's not prepared in terms. Of not sure about what will happen six months, one year down, it is a bit of challenge because the repayments, especially given the interest rates are a little high, the repayment will be there. So that stress versus the opportunity, I think that's what is going on on everybody's mind. It is

Parag Dixit10:14

going on on everyone's mind because that's the the uncertainty which we spoke about at the start. This is the one which is the biggest killer for me, and and I know that okay I can find opportunities in the market. Sometimes you know you know that you can get an opportunity in the market, but you don't want to grab it. You don't want to grab it, or you think I can't grab it because the properties which are presenting to you are not so good. So I maybe I may not be sure of if I am able to get the kind of properties are there because, as I said at the start, so maybe I have a couple of properties down the street, but I want more options. So I'm thinking this is a limitation for me. I don't want to sell because the options there are not good enough, and that's a problem because that is that that holds me back. That tells me that I don't want to take the risk. My uncertainty of being able to get the product I want is also a large uncertainty, and that holds me back. It that that's a big big issue in terms of choices. My choices are getting limited because the the supply is limited. I may have a demand. There may be a latent demand, which is what which converts into a form of this too much of a latent demand, which just keeps on bubbling under the line, and when market starts changing, this this just becomes too much of a it becomes a volcano effect. But that's a different stage right now. But we right now we are in the stage where people are unsure, undecided, and they are holding back. They're holding back because you fear that if I buy today and the prices fall tomorrow. I'm going to sit into a problem. I may have a negative equity, or I may have overpaid. This is the time when you start thinking every time. So that buyer's guilt, as soon as they sign a contract, is even higher at this point of time. When you say, if I buy today, I may get into a price which is lower. I could have paid 2% 3% 50,000, 100,000 lower. If I would have waited a few months, and I don't want to waste money, it's my hard-earned money. I don't want to put it away. So that's a huge risk, a huge price of with huge uncertainty of that price falling down. No,

Mudit12:16

no, absolutely right. And I think especially because the market has been volatile, especially this year. Last few years, we were seeing that there was continuous, consistent price increase in a lot of cities, lot of places, right? So, but this year, in in in in especially in the larger cities, the prices have gone down a bit after the legislation, especially. So that volatility and the timing of that is creating a lot of this unsettling feeling between people that I buy today and what if it falls down for that? Everybody wants to time the market perfectly, right? So I should buy at the rock bottom. But the question is, do we do we always do we know where the rock bottom is?

Parag Dixit12:55

Yeah, it's tough to know the rock bottom. You you never you can never buy at the cheapest price. You will only look back in the retrospective effect and say, "Ah, that was the point. I should have bought that month. Oh no, I had seen that property and I should have bought that. Oh, I had I was I was sure I should buy this, but I didn't because somebody told me this or whatever. So all of these thoughts keeps on keeps on coming to you, and that is where it is it's it's puts a bit of a unsurety puts you being unsure of what you want to do. There are economic pressures for sure, which are there on everyone. Which is people understand their budget. People understand what they would want to do. People understand. Okay, I can spend 2000 extra, 3000 extra when I'm upgrading, or I as a first home buyer versus my rent, I'll pay 2000 bucks extra. I'm fine with that. I can handle this, but I don't want to don't want to that my cash flow to be impacted. I'm not sure of my employment. I don't want. I don't have a holding capacity for long. I my buffers, my saving buffers will go away. I'm I can't stress test myself because I don't know how far the rates will rise or how far the property prices will go, and that really holds me back. That confusion holds me back. When you get too confused, it gets into inaction.

Mudit14:09

No, absolutely, and and that's what a lot of people are. That more people have moved on the towards the fence. There are some people, of course, who are finding opportunities, but that uncertainty is causing that inaction, and inaction is in itself an action because then you're choosing not to move forward. If you're not choosing, if you're choosing not to move forward, then there is a cost to it. You can have some benefit, and of course there can be benefit cost, but that's where the whole confusion lies. I mean, people are like, if I buy a property of let's say 750k, and what if three months down, that price of a similar property becomes 720. I mean, that's the kind of 30k. So that 30k creates that pressure. That why should I buy now? But then again,

Parag Dixit14:50

you hear it. See, if I am a first home buyer and if I am buying at 750 $1,000 and I am taking the government guarantee scheme with a 95% deposit, I have paid at I. Property I've paid a deposit of 35 $40,000 right now right for that for in that scheme, but if I buy today and the property becomes 720, then I'm then I'm basically I'm at 100% now, and it's scary for me because I I I don't want to do that. I was on a very very short shoestring budget. I was on a very small budget with the deposit which I had. Now I am paying for a property which is not worth what it was. It was, and I'm paying more for it. So, and then I I don't know how to handle this kind of a stress. I really don't know how will I be able to manage the process if I'm doing something wrong. Am I overpaying? Am I overstretching my my my budgets if I'm paying more to more repayments because my repayments will also get lowered if I get into a lower price? So all of these create so much of a stress on a first home buyer that the easiest thing is inertia. You just don't do anything.

Mudit15:58

No, absolutely. Fear

Parag Dixit15:58

always breeds inertia. It will tell us don't do anything, don't have an action, sit down there, and that's the worst you can do to yourself if you are in an environment which is which is presenting opportunities, and also there's a risk, so you need to weigh in your risk. But when the opportunity is presenting, this holding back is the biggest issue.

Mudit16:18

No, no, absolutely right. And and another thing people are talking about that okay interest rates will come down so there's a fear that should I buy right now when the interest rates are high let them fall I think that's another kind of fear that people are talking about and of course it's there if the interest rates go down then your borrowing capacity will go up the lower the the repayments will be lower so those are the benefits, but then interest rates are when interest rate is something which is it's if it's a 2030 year loan, interest rates will have multiple cycles. They will go up, they will go down many many times. But whenever I mean, generally we have seen that it is inversely proportional. If the interest rates go down, there's a there's more demand that comes in. There's pressure on the property prices. Property prices tend to go up. So if because something of an interest rate which can change every one every year multiple times, and it will change in 20 year loan, it will change a lot of times. So should the decision be based on the interest rates, or it should be on the basis of price? If you're getting a better price, then you straight away saving maybe 30 grands, 40 grand, 100 grands, whatever, depending on where you're buying. So then it becomes a more important factor compared to interest rates.

Parag Dixit17:27

100% it becomes a key factor when comes comes to when when it comes to a decision making for people. And that's and when when you're making such decisions, when you're trying to understand what I want to do, when I'm trying to see, when I'm trying to gage even what sellers are going to do, then there's then then I start really getting confused about how should I take an action and how should I really go back. You because like you like you said, if the interest rates go down and I'm holding that more buyers are going to come in. If more buyers are going to come in, that's where the form of kicks in. Like too many buyers, too less supplies, and you are into a problem, and then you think, okay, I I'm stuck. You know, what do I do? I'm I have no action point for myself to to move anywhere right now, right? Yeah.

Mudit18:10

No, no, 100% And and especially when it comes to the first home buyers, they people who are who have never bought a property in Australia, they're seeing the market cycles. Some of them have been observing, but when you are actually into it, then you start feeling it, right? And that's where a lot of other fears come in. That what if I choose a wrong property right now? Because the market is volatile. One is the price; it may go down further. Second is what if I choose a wrong property? What the the complexity of understanding the contract, seeing the properties, and then seeing that okay, it is going in auction. That all creates that pressure in their minds. The repayment pressure, of course. If I, how much should I stretch? The interest rates are a little high, but if the interest rates continue to remain high for a longer period, the today I am stretching. But can I stretch? Can I continue higher repayments for another couple of years? Or if the interest rates don't come down, so these puts too much pressure on the first home buyers.

Parag Dixit19:00

It is putting a lot of pressure on the first home buyers, and it is confusing them, and it's confusing everyone on what do I do and how do I manage that, and that's that's a that's a bit of a that's a bit of a killer to my plans, and I don't want to move any bit forward from that. And similarly for upgraders as well. If I am if I am wanting to upgrade, but I'm confused. I really don't know. I, I, the easiest is to hold on to my current property. I don't know what is going to happen. Should I make it as an investment? Can I afford two repayments? Can I afford to hold two properties? Can I afford to hold two loans? I want to keep hold on to my property. I know it's a good value property. I know it's a good location. I know it's near a nice school, but my borrowing capacity doesn't allow me. But I want to upgrade as well because now I've got kids need more room, or I need a better room, or I need a better location, so on and so forth. Whatever my reason is, but I want to. But then I'm not sure. What do I do? Sell the property? Keep the property? I don't know.

Mudit19:58

Yeah, absolutely right. A lot of people. I mean. I think for upgraders, one is of course they're seeing that people who have been looking at let's say last some time that okay I want to buy a house which is like this one, which is going to be a long term house or a dream home. Now they're seeing the prices there are dropping a bit, but then one is one big factor there is the borrowing capacity. Do you have the capacity capability capacity to sustain two properties. If not, then then of course then the choice is you sell this house, you sell this property. If the borrowing capacity or the deposit or the equity doesn't allow you that, now if you're selling it now, then there there are couple of scenarios there. Can you can you hold and can you not sell for the time being? Can you buy the one at a better price, but then you hold on to your property for some more time. Let the market become more stable. Let the prices where you're seeing okay, I don't have to discount too much. So people who are able to do that, they are they are looking at that as an option. But then at the other end, and and there that's where bridging finance kind of things can come in and help them, right? So people are looking at that as an option. Some banks provide that that you can bridge the loan. Of course, the borrowing capacity and the deposits still need to be looked at. And on the other end, they're saying that okay, if I sell this property, but then then there's pressure, and then you have to rush in the market because if you sell first and you buy later, by that time, if the market moves, that puts a pressure on you. Then you have to maybe you have to find living. Where do you live in between for the some time? If you sell sold first and you're buying later, or you make an arrangement where you buy lease back from from the person who buys your property. So there are so many options there, but each one has its own demerits. Yeah, yeah,

Parag Dixit21:36

yeah. And 100% And that's what confuses people because you don't really, you don't really you can't go to a financial planner. You can't go to an accountant. You can't go to a mortgage broker and talk to them about how do I run these scenarios because they are more emotional and personal in nature. So you think, okay, what do I do? You you know there are risks to stuff, but you don't know what do I do. You you you say, okay, do I take two loans or do I take one loan? Can I sell? But if I sell, do I sell it cheaper and then the market moves up? I'm not able to buy. Do I will I get more? Will I get less? Will I pay more? Will I pay pay less? The interest rates are killing me. The settlement deadlines are killing me. I really don't know, and that is what brings me brings me into a confusion and in a state of inertia and doesn't allow me to go anywhere, and that's what is the biggest problem. When do I? I can, like you rightly said, I can choose to do stuff. I can sell before I buy. I can lease back. I can go into somebody, someone else's house. I can get into a you know get into a temporary renting situation. I can shift in with my parents or relatives, but I really don't know what to do, and I don't have any advice on this, and that makes me cautious, or that makes me take no action. I just won't want to take an action. I just sit there, and I, you know, I miss out. Yeah, no,

Mudit23:00

100% So, and and I think it comes down to that. Some people are able to assimilate this information, and they're able to make a decision there. Okay, that what is more important: the current operational hassle of it versus the financial gain I'm getting by buying in a market where I'm able to get a discount of let's say 100k, 150k, or 200k, whatever, and that's where the the the because when we are talking to people, there are people who are saying, okay, I'm I was speaking to a client yesterday. He said, I Mudar, I've been looking at market for the last eight months, and yesterday I went to an auction. I just bought that property. I was looking to upgrade. So that was a quick decision making, and of course he had done the numbers, and we had done the numbers. So I think that's playing a bit of role there. That that inertia versus the quick understanding the different scenarios, especially for upgraders, the choices between not selling, selling first, selling later, bridging, whether you move temporary or not. So understanding those different scenarios, and of course you have to discuss as a family whether how much it is doable with the with kids, schools, all of that combined. So I think that is where a decision will help figure out whether you save that money or you continue and then you have to wait for the market eight months down, how the market will be? Nobody knows. Nobody

Parag Dixit24:23

knows, and these these thoughts really hold you back. These thoughts really hold you back, and you you also get held back because this this supply side issues, and you also get held back because because the sellers are not selling, and sellers are withdrawing the properties. It is it's always there, and that's that's the typical confusion which a first home buyer will also have. That I keep on renting, or an upgrader which will have that. Okay, do I sell and then buy, or not sell, or whatever do I do? But this and a lot of times you you realize as an upgrader on one side is that there are not too many supports to me. Government support. Don't come to me at all. But government supports come to a first home buyer, and a first home buyer can still make a decision which can allow them to move ahead. But an upgrader to make a decision is difficult because they really don't. They understand the market, but they don't know whether this the cost of inaction is coming on to them or the cost of taking an early action is going to come on to them. The first to buy heaps of benefits, right? First to buyer can benefit. No, absolutely.

Mudit25:24

The the stamp duty waiver, LMI waiver, those schemes are big schemes which are important. Then other many states have those. You can have a shared equity with the government. There are grants there, so there are multiple benefits there. And I think over years a lot of people have taken advantage of those schemes, but then again, for for for first home buyers, these incentives come and let's say they save 2030, 30 grands there. Then the question comes: Should I stretch a bit more? I have now 30 grands of saving. Yeah. The the budget is allowing me to buy a little higher value property. So I think that question comes in their mind that should I stretch a bit more, but then of course it has an impact on the long term basis of the living expenses. So you're able to buy a little premium property compared to what you were earlier thinking, and so that's that's there. But yes, I think the kind of benefits which are there for first home buyers they have helped a lot of people take the decision much sooner than what they could have done without these benefits.

Parag Dixit26:23

Yeah, absolutely right. You know, they they will they understand. First home buyers understand how they can take a benefit. A lot of first home buyers do. A lot of first home buyers don't do, but they understand what benefit it comes to them, the risks which they carry. They should really talk to a mortgage broker and they should understand the risks which they carry by taking by paying the lowest of the deposit and by having a larger repayment, or with the interest rate fluctuation, or with the negative equity. But on overall basis, first-time buyers are still very, very well off in today's time in terms of having the support which is coming to them to be able to buy. Even the government regulation, all the new regulations, which have changes which have happened, whether it's negative gearing changes or or the capital gains changes, have all been made. Considering a first home buyer should get more benefit into coming in. These these two changes have predominantly made investors slow down from entering into the market, which is given an opportunity from the first home buyers to, or even upgraders to go into the market, and then because that pressure, that that kind of competition has gone away, to be able to freely participate in the auction and not have too much of a competition on their head and buy into a cheaper entry point. But that that competition impact is definitely there, but that's this always there's always a different side to it. So with the investor changes, the first home buyers and upgraders are now competing heavily on the new build market because the new build market is is also getting more pressure from investors because the the government rules and

Mudit28:00

schemes have put them into that direction. When they've gone there, the first the newer properties was the stronghold of first home buyers, and now that has a heavy competition. So first home buyers have to come back to established properties. So there's a bit of a merry-go-round which has happened because of the policy changes which are there. But it does still mean that predominantly you're getting good opportunities as a first home buyer to be able to buy and to be able to participate in the market and to be able to get some choice properties which they want. No, no, absolutely right. I think the the legislation changes have influenced the market, but I think it will take a bit of time for because when you start doing the numbers, then how much benefit as an investor are you really getting by buying a newly newly established properties versus a new property versus an established ones? Those numbers become important because is it the negative gain impact? Is it how much impact is that in terms of the cash flow? And if it is not coming yearly, it goes on to you can still offset it later. I think these understanding of this maths will will also impact how investors relook at the market, and I think it will take a bit of time because it's just very new, and everything is just on the top of the head. Okay, this is what has happened: negative gearing has gone, so it is it is it is a big problem for investors. These are also not everybody has gone through the quantifying the the numbers and understanding whether how much impact do does it actually have on their personal numbers and finances?

Parag Dixit29:25

Absolutely right, and it is it is there, and that's what is giving. That's what is telling people that okay, prices have come down, the interest rates are stabilizing, borrowing capacity go out and find out. I think that's a good way to follow as a process. Let's just see the external environment around you. Talk to your friends. Talk to your near and dear ones. Talk to someone who who you can depend upon. See what kind of demand changes are happening there. See the taxation changes are happening there, and then on the basis of it, see okay it suits me. And let me jump in. I've got all the advice which I want, and I think that I'm not a little bit of a up and down is not going to impact my health. So this is an important time for me to be able to to to be able to take decision and go into there, right? And that's that's how it allows me as a first home buyer to to to go there and to make be positive and to take this opportunity because you never know whether this opportunity can last longer or with this opportunity has just had a small window.

Mudit30:27

No, absolutely, especially with the way the whole volatility is is there in the market. That any event, any global event, can impact the prices so much. So I think it's about the windows of opportunity. It's about opportunities today. Now, of course, there is a possibility the prices can go continue going down further. There's a possibility they may go up, but the action also depends on what your outlook is. You think the prices are going down, gonna go down further because there's one thing which is what is being carried out in the media, there's one thing which is posturing. One thing is what is really happening on the ground. So these windows of opportunity may not last last very long. Sometimes they are very short windows, and you have to make the best of it in that window. So in 2027, will the market continue to go down or will the market remain similar? Very difficult to stay. Very difficult to say as of now. Now just going going on the again like the we are talking about first home buyers upgraders. Now up for upgraders, I think there's one thing that they think the market a little differently from first home buyers, right? So because they have gone through they've gone through the cycle once. So somebody who's made a purchase decision of a high value prop high value asset, then they have done it once. So for them, the decision making is relatively simpler compared to how how much anxiety there is in first home buyers, right? So for upgraders, I mean, if if there's a if I I was just talking like I was telling telling about this this this client of mine, there they they had a property of 700k. I just want to put some numbers to it so that it goes in terms of how people how people were looking at upgrading, thinking about it. How does it impact? So they had a property of 700k, and there's a 3% drop in their property price. So roughly, it it went for 20k lower. So they had to they they decided to sell it. So it went for roughly 680 k. But the property they had looking to buy that was for 1.31 million dollars, and that that was before three months of work. That was the price, but it had dropped by almost 10% So there's a drop in the premium properties was low, has been much higher, and this property they were able to secure for 1.17 something in that range. Yeah. Now that resulted in a straight saving of close to 110 grands for them because the price that they paid for the new property was much lower than what they would have paid six months ago.

Parag Dixit32:49

Absolutely right, and that delta is a great benefit. You know, you realize that okay, I have got a good 100, 110,000 benefit, which is which I have got because of this, and this allows me to be able to get into the property market. This allows me to be able to choose better and to be able to take a decision better about how I'm going to do that. And that's that's the that's that's that's a solid benefit for a for an upgrader to move into this market, right?

Mudit33:19

Yeah, no, absolutely. Now, and I think there is a reason why these the higher value properties they are falling a bit more. First of all, there is a smaller buyer pool for them. The moment you start going at more value properties, the number of people who are there to to bid for those reduces. So there is lesser competition, and then there is a there is because because there's greater dependence on you need to have higher borrowing capacity to be able to afford such a property. So so directly that creates that these properties there's less competition and the moment there is less competition, especially given today's market, the drop is higher there, and that is what is being seen across markets. the The entry level properties are not dropping by that much margin compared to the higher value properties.

Parag Dixit34:04

True, true, and this, this, that's obviously that's because your borrowing keeps on getting stressed as as you go into a higher price points, and that's how it allows. That's how it's making the higher value properties suffer a bit more, and that's and that's that also brings you negotiation powers to a to an upgrader. You know it tells you okay. I've also got another upgrader who wants to sell his property who was not keen enough to sell first, and now they've they are kind of bound by a time period to sell. So that's where they can negotiate a bit more. You can negotiate on the properties which didn't go through in an auction, so you've got a lot of opportunities where you can

Mudit34:43

absolutely. That's very interesting. So people are looking at these specific indicators. One is something which is passing in at auction. Then go later and negotiate because you know that somebody who's selling in this market is really okay with the is okay with the lower price. Yeah, yeah, yeah. So you know that this guy is really looking to sell. And you have a much higher bargaining power. Second is they're looking at which properties have been there in the market for a long time. The longer days on market means that again this shows that the vendor is going through that phase where they want to really sell. So these are indicators which which buyers, especially the upgraders, upgraders they are looking at to see that where is the competition lower, which which vendors are struggling right now, and they really want to see. And

Parag Dixit35:27

you can be intelligent to try and search through the market scenario, and you can be intelligent to see all these things and say, okay, I've got I've got my target area mapped out, and I would want to attack in this area, and that's how it will give me a benefit of of buying and getting that delta benefit of upgrading and choosing a property and still making financial benefit out of it.

Mudit35:51

No, absolutely. Now I think that's that's that's market is quite quite attractive from that angle. Now, but at the same time, when they talk about the interest rates, right? The whole idea about that the interest rates now there are, especially given that it's it's in the last couple of times the RBA has met, the interest rates have gone up. Now there is confusion regarding that that whether the rates will go up further, will will stay put, or will they start going down in near future? And these all scenarios are playing in people's mind when they're looking to buy. That if the if the rates go further up, then then am I better off buying right now? That pressure is there. That how much can I stretch?

Parag Dixit36:35

Yeah, yeah, yeah. That's true. That's and that that pressure creates an an urgency to act or lethargy to not act, but these are this this that's the reason why people are holding, but people are not holding, and that gives you an action point. Okay, I would want to move ahead, and I would want to buy, and I would want to do. And these are some of the thoughts which an upgrader or a first home buyer can have in their mind. That okay. Let me let me weigh out all my costs, my emotional cost, my financial cost. I know the interest rate environment. I know the taxation environment. I know the legislation environment. I know a first home buyer has a benefit. I know an upgrader has a benefit. In these times, if I can sometimes you know just write it down on a piece of paper and note down all your points and say, okay, it makes sense for me to take a decision now and sell and buy, or if it makes sense for me to decision to make a decision now to not rent and move on into and to into my first home and then move into a property which I would want to do, and that that gives me some some action points of how I should navigate this market and how I should be able to take a call on the way I would want to jump in and the way I would want to move forward into into taking a decision of buying because there's a lot of benefit which comes if you're buying at the right time but the regret is always there you know this this time may come back in three years, four years, five years, but then you you missed out already, right?

Mudit38:05

Absolutely, I think there's there's a term like the cost of waiting. That if you wait a bit longer, then there could be a cost to it. What's the cost that you the prices may go up? The the once the interest rate, especially once the interest rates start coming down, which is not likely right now, but it's it may not be far away. Given the how the the economy is is positioning, how the global economy is going, how the inflation has been there, it is a chance that sooner to to give a push to the economy, RBA might be forced to bring down the rates in a in not so distant future, distant future. Now, when the rates started start coming down, it we have seen that every time the rates have come down, there has been a upward pressure on the property prices. So that could be the cost of waiting longer. So yes, interest rates coming down will help increase the borrowing capacity a bit. But if it goes up by let's say whatever 50 grand, but if the property prices go up by the similar value, then you're not better off. You're not better off in that scenario at all. Yeah,

Parag Dixit39:07

you know. Now that's fair, and that's that's a that's that's a that's the right way to think about in terms of what do I lose and what do I gain and how do I make my next steps into taking a taking into a buying, if I am looking at buying my first property, or if I am looking at upgrading, I think I'm. I'm really. It makes sense for me to sit down with someone who understands this market and to be able to take professional advice, and then they can guide us on how do we move forward. Or I can sit down with the family and I can plan out on what do I do? I can prioritize what are my objectives. I can prioritize what are my goals, and I can prioritize what do I want to get out of the transaction. I want to live in my own house. I want to move away from my renting thing as a first home buyer, or I want to say that this is my time where I can go near the catchment where I want to live in, or I can go into an exit. Or I can get into a bigger house. I can get into a five-bedroom house, so on and so forth. And that that if I am able to prioritize what I want to do, and if I am able to do all my mathematical and my emotional calculations, then I am better off. And this is and this this tells me that okay, I really don't need to start worrying about is this the best and the cheapest time to buy, because some bit here and there will not make too much of a difference. And I can maybe in these times maybe I can even negotiate more and get what I want, and I am able to achieve my objectives and my goals much sooner than what I would have done if I would have saved this money. And this this kind of an opportunity would not have come to me, right?

Mudit40:41

No, no, 100% correct. I think you you said it absolutely right that perfect timing the market is is is is not something you will not know it today. You will only know it a year, two years later that that was the right time to buy. So perfect timing the market is not so easy to do. I think the right way is that see whether is this a good enough market for me to operate in. Prioritize, like you said, the fundamentals. Figure out that your borrowing capacity, what kind of property you want to buy. Are you able to buy the kind of house you wanted to buy in the in the in the current time? Yeah. Are you able to? Because everybody, especially the buying a home, it's not an investment property. There's a lot of emotion there, a lot of social factor there, a lot of stability factor there. So if you're able to look at a house from that angle, and if you see that yes, this is the kind of house I wanted to buy, now it is coming in my budget, right? So I think that is that in general, that's a that that doesn't happen so easily. So if that is happening and your numbers are aligning, then go for it. This is not a bad time that phase. This

Parag Dixit41:45

is not a bad time that phase. I think the best part would be to take an action. If if you are out there and if you think that you want to upgrade, if you're out there and you think that it's the time for me to be able to buy my first home, this this is the time to take action and to move forward and to be able to analyze, to sit with people, you know, to sit with your experts, experts, to sit with the mortgage brokers, to sit with a buyer agent, an accountant, a financial planner, whoever you can trust upon. But the time is there where you can you should move. And if you think that this is the you are having an opportunity, it's the time to declutter your mind, to take some action, take some decisions, and move with the times. Move with the good times, which come to a first on wire on an upgrader right now.

Mudit42:30

Absolutely right. I think that was a that I think I don't want to dilute it further. You ended it at a very right statement, and this is this is the this is the this is the time that you have to look at the numbers and decide for yourself.

Parag Dixit42:43

Awesome! Thank you so much. Thank you, Faraj. Thanks, thanks,

Mudit42:47

Parag. Thanks for the inputs. See you.