The New Year is always a time of reflection, and property investment is no different.

Trying to work out what the market is going to do this year and assessing whether it’s a good time to buy (or sell) property are questions that will be at the forefront of many investors’ thoughts in the next few months.

For Australians who are already established on the property ladder, some may be thinking whether to upgrade to a bigger property. But is that a good idea when many market commentators are saying house prices may fall this year?

While we have noticed an increased number of properties hitting the market recently – and an increased supply would suggest prices will be muted in the coming months – that doesn’t necessarily mean it’s a bad time to upgrade. Here’s why..

Stay away from the herd

An important consideration when deciding when to buy (or sell) property is to do what’s right for you at the time, and more importantly, not get caught up in the ‘herd mentality’ of short-term market movements.

It’s true that some property owners around Australia may be struggling to make mortgage repayments right now due to the crippling interest rate hikes of the last 12 months. Putting their house on the market may be their only option, and that creates a buying opportunity.

Even more importantly, other property owners may follow the crowd and put their own property on the market if they sense the market may be falling (the latest CoreLogic data suggests this is already happening in Melbourne for example).

It could be argued that this second group are acting on emotion – reacting to short term price movements by listing on the fear that they will get a worse price in six to twelve months’ time.

Experienced investors know that emotion is not something that should be a major factor in investment decisions.

Staying away from the herd may be a more prudent way to go.

A long term view

Property is, by its very nature, an illiquid asset – which means it can’t be quickly and easily converted into cash at a fair market value.

Yes, we can sell houses and keep the money in the bank, but this takes time even in the most buoyant market (which the current one isn’t). Market sentiment can change in the time between listing a property and selling it, and you may not get the price your property was theoretically worth when it listed.

So, what does this mean for buyers? The main thing to take out of property being an illiquid asset for buyers is that it’s a long-term investment, which over time will overcome any short-term market fluctuations.

The good news is that history tells us over the long term, property in Australia has outperformed just about all other asset classes, particularly in the big cities.

For example, the average price for a three-bedroom house in Sydney back in 2013 was $777,312 according to 2023 data from SQM Research. In the last 10 years this has more than doubled to an average of $1,595,583 for the same three-bed property, an average increase of 7.20% every year.

It’s a similar scenario in Melbourne and Brisbane, which have both seen property investors nearly double their money in the last 10 years (on average).

While the market may be currently undergoing a minor correction, the long-term trends in Australia’s major cities are clear, and with a shortage of new houses being built as well as positive net migration, this trend isn’t likely to change any time soon.

Buyers should be aware of this when deciding whether now is the time to invest in a larger family home.

Bridging loans an option

So, working on the assumption that now might be a good time to invest in upgrading to a bigger property, what’s the best way of doing this?

One common challenge is that you see your dream home come on the market, but you can’t afford to buy it before selling your existing property first. And by the time you do that, it’s gone.

There may be a solution to this age-old problem – a bridging loan.

Bridging loans are a short-term loan that can help you finance a new house purchase while you sell your current property. You can check out more on bridging loans in our recent blog here.

This option can work in a number of scenarios.

The obvious one is to put your house on the market and then buy the bigger version, using a bridging loan to cover the gap while your existing property sells. You generally need significant amount of equity in your existing property for this to work effectively, so it isn’t always the best route for newer property owners.

Another option could be to consider turning your existing home into an investment property, renting it out to cover the mortgage while you upgrade to a new home.

Rental prices are sky high at present, and a bridging loan could facilitate you capitalising on this while buying a bigger property. It’s worth noting though that most bridging loans require you to pay them off within 12 months, so you need to sell the original property within this time frame to make this option viable.

The best investment decisions are generally ones that are planned in advance and suit your own personal circumstances. Whatever option you choose needs to be the right one for you at the time.

However, being swayed by short-term market fluctuations is rarely the way to make money over the long-term, which is traditionally the aim of any property investor.

If you take these principles into consideration, buying that dream home and moving into a bigger family home in 2024 may be an excellent long-term decision.

Loanscope have many years of experience handling bridging loan solutions for customers looking to upgrade their own home or build their property portfolio – contact us for a confidential, obligation free discussion.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Emmanuel Guignard (MBA)
Director & Principal Mortgage Broker
With over 15 years’ experience in the finance industry and a recently completed MBA in Financial Planning, Emmanuel leads the broking team at Loanscope. His experience includes working with a wide range of property investors, from first time buyers to investors with large property portfolios. This includes handling complex applications involving trusts, company structures and self-managed super funds. He also operates as a qualified mentor to other mortgage brokers via the FBBA mentor program.
Emmanuel Guignard