What to do if home prices max out your budget

BY REALESTATEVIEW.COM.AU

You find a dream home in an ideal suburb after months of rifling through listings, your finances are in order and you have sky-high hopes at auction.

But then, after getting pipped at the post by another bidder who seemingly has a bottomless wallet, you’re thinking about packing it in.

It’s a common buyer’s dilemma that’s become more widespread as prices around the nation shoot to new heights, prompting some to consider sitting on the sidelines altogether.

Wakelin Property Advisory director Jarrod McCabe said compromise was one way to work around rising prices, but that did not mean you had to settle for a dump.

“The difficulty with sitting out of the market is unless you’re likely to come into some form of financial windfall, you’re not going to out-save the market,” Mr McCabe said.

“So it then comes down to thinking about what are your options, and you can compromise in some areas.”

So, what does that look like? And how can buyers ensure they are making sensible changes to their wish list without compromising on health
or lifestyle?

The three keys to compromising

Mr McCabe said buyers can compromise in three ways: location, the type of property and price.

“When you’re thinking about location, don’t just think about the suburb but the general area, which includes access to services – whether it be friends, schools, gyms, parklands, sporting clubs – that may then affect your particular types of street,” he said.

Mr McCabe said broadening the styles of property on a wishlist can also keep bidders in suburbs they would otherwise consider out of reach.
Buyers seeking out a home that can be moved into without renovations may have less latitude in inner suburbs, while those hunting dilapidated doer-uppers or 19th-century terraced homes may be luckier, he said.

Porter’s House buyer’s agent Cameron Porter said it’s possible, however, that the cost of renovating a run-down home could outweigh the overall value you would be adding to the property.

Spending $20,000 on restumping a floor, for example, has less bang for buck than spending the same amount to replace a poor-quality kitchen in an otherwise stable home, he said.

“If you’re a builder or have friends who can carry out a more structural renovation or an extension, building underneath the home or knocking down walls, you’ll take on less risk,” Mr Porter said.

Are there non-negotiables when compromising?

Mr Porter said buyers should shy away from compromises that could put their family’s long-term health at risk.

Properties with poor ventilation or prone to moisture build-up will not only pose an immediate health hazard, but could also diminish the value of the property if the buyer later wants to sell.

“People will sometimes start to compromise on busy roads or properties that may be blocked in a valley or between larger buildings, which means that they may only get a couple of hours of sunlight a day, or they find a home that has moisture problems,” Mr Porter said.
What should I do as prices rise higher?

PRD Research chief economist Diaswati Mardiasmo said the sharp rises in prices had doubled the interest among inner and middle suburbanites in outer-metropolitan markets compared to pre-pandemic.

And that’s because the rate of growth in those areas has outstripped wages.

But with interest rates at record lows, she said the number of suburbs that are more liveable and affordable has grown.

“COVID has shifted people’s priorities in terms of what we want in life and that’s shifted the conversation around whether it’s important to have affordability as there’s more uncertainty over people losing their job and people are comprising more,” Dr Mardiasmo said.

“But people still need to ensure if they do relocate a little further out that there is still good public transport, amenities and key infrastructure like hospitals and supermarkets nearby.”