News headlines over the past 9 months would have you believe that there are bargains to be had in Sydney. While yes, there are some properties and pockets where properties may be selling for less than they did in 2021, the real question you need to ask is, are you better off in the long run?

If you purchased a good quality asset in 2021, at the peak of the market, fixed your interest rate for 2 years, then you are still well ahead and better off than if you had waited. This is because the interest you have saved by buying at a time when you could fix your loan at 2%, has far outweighed the decline in property prices.

If you purchased in 2022, and “saved” yourself $55,000 on purchase price, then you will find yourself breaking even with the scenario of having purchased a year earlier.

Data indicates that property prices have slowed in their decline, and it’s likely the “bottom” of the market will be called around Q1 2023.

If you’re still waiting and planning to buy in later 2023, assuming prices softened a little more, you are actually still worse off in the long run compared to those who purchased in 2021 and 2022. While your purchase price and mortgage amount are less, simply the effect of the higher interest rates on your loan from day 1, mean you pay significantly ($117,991 to be exact) more interest over the life of your loan.

The other really challenging piece to swallow, is that unless your income increased or your expenses decreased between 2021 and 2023, you won’t actually be able to borrow the amount to afford that property that did drop in price - again, due to interest rates and how banks calculate affordable repayments.

I’ve illustrated this out on the table below:

While not trying to be negative Nancy, I think it is important to highlight for home buyers that:

• Property price is only one factor when looking to achieve a financial gain on your property

• Mortgage repayments and total interest charged on your loan over time are equally as important as property price

• Property prices are cyclical, but waiting isn’t necessarily going to garner you the outcome you think it is

If you’re in the market to buy in 2023, the best action you can take is to:

• Understand your borrowing power and what value property this will allow you to afford

• Ensure your mortgage broker has a pro active customer relationship and will ensure they are reviewing your interest rate regularly

• Understand the effects of compound interest and work to offset or make additional repayments on your home in the early years to save yourself in the long run

• Buy an A grade quality asset that will sell well in any market

Disclaimer:

The above does not constitute financial advice and is my opinion and analysis only.

This is only one example, and the outcome will be different based on different prices, interest rates etc.

The assumption is based on a 30 year mortgage with no additional repayments.