Buying
6 most common myths about buying a property
26-Sep-2022
If you’re on the hunt for a new home or investment property, no doubt you've been bombarded with well-meaning advice from family and friends.
But be cautious — there are plenty of popular untruths out there.
Here are some of the most common myths of buying a home, debunked.
1. All property goes up in value
There's money to be made in good property decisions, but don’t think that means every home on the market will deliver significant capital gains.
“It’s not really true," says Frank Valentic, Director of Advantage Property. "There's a lot of properties out there that don't do anything."
Plus, every location has its own individual factors that will influence price growth. Each state is different; metro and regional markets are different; each suburb or town is different, too!
For example, the PropTrack Home Price Index found that in June, the median price in Melbourne and Sydney fell slightly, but hit new heights in Hobart and Adelaide.
If you're thinking of buying an investment property, do your due diligence and research property locations and types that will deliver on your financial needs over time.
2. Buying off-the-plan gives you stamp duty savings
Off-the-plan homes once offered substantial tax savings, but this is no longer the case.
Victoria has now phased out some of its major stamp duty concessions, Valentic says.
There are currently no stamp duty savings for off-the-plan in Queensland either, or in New South Wales, although buyers can defer paying tax for the 12 months after signing the contract.
Check the rules in your jurisdiction is Valentic’s tip, as paying stamp duty will have a "significant impact" on your budget, as the rules around concessions are constantly changing.
3. Home loan approvals take a long time
Some people are terrified about the long wait to get the final tick of approval from the bank before settlement.
It’s not surprising — a survey by PureProfile found one in five people missed out on a property because their lender took too long.
The fear of ‘no approval’ is valid, but it is also avoidable.
There are many smaller lenders out there that might not only save you time on approval, but also end up being a much better deal, Valentic says.
"There are so many different options now, so we always recommend our clients shop around," he says.
4. Inner-city properties offer the most gain
Right now, in both Melbourne and Sydney, there are plenty of inner city apartments on the market. This surplus of supply could impact price growth for these properties.
Melbourne, in particular, has a lot of one-bedroom apartments on the market, which leads to stagnant property values.
Think about the reason you're buying — pick the property for your budget and needs.
For example, the area of Melbourne with the largest year-on-year home price growth to June '22 was the Mornington Peninsula. In Sydney, it was areas in the south west.
5. You need to get pre-approval
About half of property buyers apply for pre-approval, the PureProfile survey revealed.
That means about half of all property purchases are completed without pre-approval.
Why? Because even after you have pre-approval, the banks still make you jump through hoops to get full approval.
For 96% of buyers who went through the pre-approval process, the stated aim was to alleviate stress. However, just because you have pre-approval, doesn't mean you'll assured of full approval.
Once you actually commit to buy, many lenders make you go back to square one and start the approval process from scratch. That takes a lot of time.
6. Fixed rates are best
Not always true — especially in today's market.
Check your numbers and work out which option will work best for you. Plus, you always have the option to refinance at a later date.
SOURCE: Realestate.com.au
IMAGE: Newton Real Estate
But be cautious — there are plenty of popular untruths out there.
Here are some of the most common myths of buying a home, debunked.
1. All property goes up in value
There's money to be made in good property decisions, but don’t think that means every home on the market will deliver significant capital gains.
“It’s not really true," says Frank Valentic, Director of Advantage Property. "There's a lot of properties out there that don't do anything."
Plus, every location has its own individual factors that will influence price growth. Each state is different; metro and regional markets are different; each suburb or town is different, too!
For example, the PropTrack Home Price Index found that in June, the median price in Melbourne and Sydney fell slightly, but hit new heights in Hobart and Adelaide.
If you're thinking of buying an investment property, do your due diligence and research property locations and types that will deliver on your financial needs over time.
2. Buying off-the-plan gives you stamp duty savings
Off-the-plan homes once offered substantial tax savings, but this is no longer the case.
Victoria has now phased out some of its major stamp duty concessions, Valentic says.
There are currently no stamp duty savings for off-the-plan in Queensland either, or in New South Wales, although buyers can defer paying tax for the 12 months after signing the contract.
Check the rules in your jurisdiction is Valentic’s tip, as paying stamp duty will have a "significant impact" on your budget, as the rules around concessions are constantly changing.
3. Home loan approvals take a long time
Some people are terrified about the long wait to get the final tick of approval from the bank before settlement.
It’s not surprising — a survey by PureProfile found one in five people missed out on a property because their lender took too long.
The fear of ‘no approval’ is valid, but it is also avoidable.
There are many smaller lenders out there that might not only save you time on approval, but also end up being a much better deal, Valentic says.
"There are so many different options now, so we always recommend our clients shop around," he says.
4. Inner-city properties offer the most gain
Right now, in both Melbourne and Sydney, there are plenty of inner city apartments on the market. This surplus of supply could impact price growth for these properties.
Melbourne, in particular, has a lot of one-bedroom apartments on the market, which leads to stagnant property values.
Think about the reason you're buying — pick the property for your budget and needs.
For example, the area of Melbourne with the largest year-on-year home price growth to June '22 was the Mornington Peninsula. In Sydney, it was areas in the south west.
5. You need to get pre-approval
About half of property buyers apply for pre-approval, the PureProfile survey revealed.
That means about half of all property purchases are completed without pre-approval.
Why? Because even after you have pre-approval, the banks still make you jump through hoops to get full approval.
For 96% of buyers who went through the pre-approval process, the stated aim was to alleviate stress. However, just because you have pre-approval, doesn't mean you'll assured of full approval.
Once you actually commit to buy, many lenders make you go back to square one and start the approval process from scratch. That takes a lot of time.
6. Fixed rates are best
Not always true — especially in today's market.
Check your numbers and work out which option will work best for you. Plus, you always have the option to refinance at a later date.
SOURCE: Realestate.com.au
IMAGE: Newton Real Estate