As a proud homeowner, you enjoy the freedom of owning your own home and being able to adapt it to your changing needs and tastes. If you like your neighborhood, you don't have to move when you need a bigger house, you just add on an extra room. However, sometimes, the general economy makes selling up a better option than staying put. So what do economics say about Australia's housing market? Should you sell now?
The Benefits of Staying Put
For most homeowners, the home is their biggest investment by far. Unlike the second most expensive thing you own - your car - your home rarely depreciates in value. The Australian property market is hot right now. So, those who already own a property are almost guaranteed a rise in value of their key investments. With interest rates at rock bottom and not likely to rise for the foreseeable future, you are more likely to increase your net worth by borrow money and putting everything you've got into a property than you are putting your savings in a high interest account.
Reasons to Sell
A rising market is a good time to move up the property ladder. When all properties rise by 10 per cent a year, you can get an income out of an expensive home's rise in value, but a low-cost home's gains aren't so bankable. In falling markets, you would be better off staying put and extending or improving your home and in stagnant markets, your personal circumstances take priority over whether to sell or stay. If you have to sell and house prices are likely to fall, you would be smart to sell and rent for a while, waiting to buy at lower prices.
According to the IMF, the Australian property market became the third most expensive in the world back in June 2014. Since then, prices have continued to rise. Sydney bears a heavy responsibility for these numbers, rising faster than the rest of the country and distorting average prices. This issue is termed "affordability" and it is one of the factors that economists look at when determining whether there is a bubble in the housing market and the risk of a price crash. The problem with affordability, though, is that it affects the rental market as well as the ownership market. So, Australian rentals are just as unaffordable as sales.
The government wants to encourage home ownership. However, they are aware that an over-heating market can cause a bubble, and they have to manage that problem. The government has already tapped the breaks a little and taken the heat out of the Sydney housing market. The standard reaction of governments to housing bubbles is to try to keep prices on hold and hope rising wages will restore affordability. House prices are unlikely to fall any time soon, but headline-grabbing price rises are a thing of the past. The government will implement policies to keep prices more or less exactly where they are for some time to come.
It's All About You
Times when house prices are flat are actually enjoyable. A stable market takes speculators out of the housing market and they go off and distort prices elsewhere. You can then decide whether to sell and rent, trade down or trade up purely on the merits of your own wishes and circumstances. Look upon your house as your home rather than your investment portfolio, and you will enjoy the market to come.