5 market trends property buyers should consider in 2024
Keeping an eye on the wider property market is part of being a savvy buyer.
Sponsored by QBE – helping customers learn more about lenders' mortgage insurance (LMI). Learn more on Finder's LMI hub, brought to you by QBE Insurance. Providing LMI since 1965.
Looking to buy property this year? Whether you're an investor or looking for a dream home, it's crucial to keep your finger on the pulse of market trends.
1. Using LMI to purchase sooner
Given the swelling house prices, jumps in the cash rate and the overall increase in the cost of living, it's understandable that many Australians are having difficulty saving a 20% deposit for property.
The good news is that there are tools available. Borrowers are increasingly using Lenders Mortgage Insurance (LMI) as a means to get a foot on the property ladder.
You can learn more about the specifics of how LMI works over at the QBE LMI Hub.
In short, though, it's an additional fee added to your home loan when you have less than a 20% deposit. It can be applied to personal and investment properties.
This adds extra cost in the short term, but it can also help you with bypassing a lengthy period of saving.
To put matters into perspective, Finder research suggests that if you start saving today, you'd need to save for at least 12 years for an apartment deposit or 16 years for a home deposit.
By contrast, opting to use LMI can let you bypass some of this time spent saving, and allow you to start building equity in property more rapidly.
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2. Rising interest rates
Interest rates continue to be a major bugbear for buyers. Given the direct influence they have on repayment amounts, it's no wonder that many Australians are facing mortgage stress.
Being able to repay a loan at the current rate is one thing; being able to continue to repay it if the cash rate or cost of living rises is another thing entirely.
Though refinancing can help provide some relief – more on that in a moment – it's clear that buyers in 2024 need to exercise caution when selecting a loan.
Careful research on the benefits of fixed and variable rates is essential. It's also worth consulting with a professional about your specific circumstances.
💵Shopping around for lenders
Home loans aren't all created equal. It's worth shopping around to find a loan that suits your particular needs.
Additionally, if you're using LMI, that doesn't mean you need to compromise on lender choice. At the bottom of this article, you can see a selection of lenders that QBE works with.
3. House prices
Housing prices saw a bit of a dip in 2023 from the highs of 2021, but that doesn't necessarily mean housing was more affordable per se.
To get a feel for the real situation, you need to look back a bit further. The Finder First Home Buyer's Report found that from 2002-2022, residential house prices went up by 376%.
Wages, though? They only increased by 77% during that same period.
In practical terms, this means longer savings periods and bigger loans. LMI from providers like QBE can assist in the process.
However, it's also important to weigh up your options when purchasing a property – whether for yourself or as an investment.
Keeping a close eye on pricing can help you make an informed decision about whether you want to stick to a particular area, or whether it's worth looking elsewhere.
🏡Knowing the real price of a home
Buying a home – or investment property, for that matter – isn't just about the purchase price. You've also got to factor in stamp duty and other administrative costs. You also can't forget about longer-term costs such as water bills, council rates, strata, insurance and more.
Having a clear picture of these costs ahead of time can help you determine the overall affordability of a property.
4. Refinancing vs opting for a new loan
If you're thinking about upgrading your home or expanding your property portfolio, it's worth considering whether you should refinance or take out an entirely new loan.
Finder's Housing Market Report found that 62% of people considering refinancing are stressed about their current loan.
Refinancing can offer a range of benefits, including relieving day-to-day stress around costs, adding new features to your loan or enabling wider debt consolidation.
However, there are occasions when it's worth looking at an entirely new loan. It can enable you to work with a different lender or to leverage your existing equity and assets more effectively.
LMI may also be a factor to consider; although it does add some cost, it's also a way to expand your potential borrowing power.
Everyone's financial situation is unique, though. It's always worth consulting with an expert before proceeding with a major financial decision.
🏦Looking beyond interest
There's no question that interest rates are important. But they're not the be-all and end-all when it comes to refinancing or taking out a new loan. Look for a loan that also offers features such as offset accounts, extra repayments and redraw. When used correctly, these can help you save money and shorten the lifespan of your loan in the long run.
5. Pressure on investors
Most of the press around rises in the cost of living has (understandably) tended to centre on residents and renters.
But investors are often under pressure themselves. In fact, 2023 Finder research revealed that 2 in 5 of surveyed investors are considering selling their property*.
In the longer-term, it's possible that this may create more opportunities for buyers as investors offload excess properties.
However, it's also a cautionary tale; if you're looking to invest this year, it's key to be aware of the financial pressure it can place on you.
🤝Raising rent vs retaining tenants
For most property investors, renters are their main source of investing income. So balancing rental prices and retaining tenants can be a delicate balancing act.
Though there's some suggestion that rents will rise during 2024, it's important to consider whether projected income down the track from hypothetical tenants is more valuable than the income currently being earned from existing tenants.
Learn more about how LMI with QBE
Sponsored by QBE – helping customers learn more about lenders' mortgage insurance (LMI). Learn more on Finder's LMI hub, brought to you by QBE Insurance. Providing LMI since 1965.
