If you’re on the hunt for a new home or investment property, there is no doubt you’ve been bombarded with well-meaning advice from family and friends. Be aware though that some of the advice you are being given may be old news or just completely untrue.
Here are some of the most common myths of buying a home, debunked.
All property goes up in value
Not every home on the market will deliver significant capital gains and there are a lot of properties out there that don’t. Every location has its own individual factors that will influence price growth. Each state is different, metro and regional markets are different and each suburb or town is different, so it makes it tough to compare between them.
Examples of this can be seen currently where prices are dropping in some areas while rising in others. 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.
Buying off-the-plan gives you stamp duty savings
In some cases, off the plan home can offer substantial tax saving especially when it comes to stamp duty. This unfortunately is no longer the case with some states starting to phase out its major stamp duty concessions. The rules around concessions are constantly changing so it is advised to check in on the rules in your jurisdiction.
Home loan approvals take a long time
Some people are terrified of the wait that it takes to get the final tick of approval from the bank before settlement. Surveys have found that one in five people have missed out on property because their lender took too long.
The fear of not getting approval is valid but also avoidable by getting all paperwork sorted well in advance. There are also numerous lenders, and it is advised to shop around to find the best deals and the best lenders that will be able to provide you with approval quickly.
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 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.
You need to get pre-approval
About half of property buyers apply for pre-approval however this also means that half of all property purchases are completed without pre-approval. Even after you have pre-approval, banks will still make you go through a tedious process to get full approval. This means you can bid and make offers on a property subject to finance.
It’s cheaper to rent than own
This one is not necessarily always true. There are some situations where there are areas that are the home prices are so high that renting is way cheaper. In other cities, and small towns, your mortgage, rates and insurance all come out to be less than what you would be paying for rent. Many can also justify paying a little bit more for their mortgage as the money spent every month goes toward something you’re working to own.
Buy the worst house on the best street
Many people emphasise the importance of location however sometimes it is easier and more cost efficient to buy the average house in a location that doesn’t need lots of work done to it. With the cost of resources and building going up, it is sometimes more costly to do all the required work.
You want to have a greater portion of the value in the land than in the improvements on the land. Technically it’s the land that appreciates over time, not the dwelling. In the midst of current construction labour shortage and building supply chain challenges, it would be difficult and even more costly to complete renovations over the next few years.
A one-bedroom home is a dud investment
Many people have different opinions about this myth. As discussed earlier in the article, when the market is saturated in one type of property, it becomes harder to sell. This does not necessarily make it a dud investment as there are many people who would be able to rent the property. Around 55% of households in Australia are made up of one person or a couple without kids. By dismissing one-bedroom homes, you are ruling out more than half your market.