Its boomtown time again. Sydney’s average house price has soared through the $1 million mark for the very first time with home prices rising by 8.4% during the June 2015 quarter according to the Domain House Price Report.
We’ve surpassed median prices in London and are just a smidge away from New York!
While this seems like great news for homeowners, we like to err on the side of caution during real estate boom times. Remember there is a bubble and bubbles burst.
If you are a home owner or renter, the latest property prices can impact other areas of your financial wellbeing. The key to success is to be measured and smart with your financial decision making. Don’t get caught up in the real estate craziness. Look beyond a year and consider how decisions you make now will impact you long term.
Here is some of our advice around keeping your financial wellbeing on track while everything is going crazy around you.
1. Don’t get caught in the sell sell sell trap
Real estate agents are knocking on doors in Sydney asking people to sell their homes. And yes, you WILL get a good price but remember you have to buy in this market too which means buying a potentially overpriced house in a boom market, moving costs and outrageous stamp duty. If you’re thinking of moving interstate or to the country, it’s a different story. But don’t sell your house if you can’t afford it.
2. Cater for future interest rate rises
If you are buying a property in this market, do your sums on your mortgage repayments. One of the reasons the real estate market is going crazy is because of historically low interest rates. If you are struggling to repay your mortgage now when the official cash interest rate is 2%, think about how you’ll find the money for repayments when it starts to go back up again. Interest rates got right up to 17% back in the 1980s which caused all sorts of problems for home owners and the economy. Don’t get caught out.
3. Keep all those eggs out of the one basket
Your financial wellbeing is dependent on a smart and balanced approach to investing and saving for the future. Don’t throw all those real estate eggs into the one bricks and mortar basket. Always consider having a financial portfolio that includes shares, long term investment, rental property investment and topping up your super.
4. Get your insurance right
Remember that there can be market fluctuations in real estate, shares, commodities, superannuation. It’s all swings and roundabouts. What you need to do is make sure you have the right insurance to cover you if things go wrong. Life insurance, income protection, mortgage insurance. It all helps to give you peace of mind when bubbles burst and boom times self-implode.
The key is having a trusted financial advisor to help you in times like this. Here at Blenkhorn we are experienced with all sorts of economies having seen it all from boom to bust to boom again. Providing guidance during times of prosperity is just as important as providing advice during tough times.
It’s about taking advantage of what you need to without getting swept up in a financial sun shower that could turn into a category 5 storm any second.
Please contact us for a complimentary consultation to ensure you don’t have all of your eggs in the one basket!