Should I buy a house now or wait for interest rates to fall?

It’s the $1.09 million question: should you buy a house now before prices rise any further – or wait until interest rates fall later this year, when you might be better able to raise the funds?

Both house and unit prices across the combined capital cities have hit new record levels, according to the latest Domain House Report for the December quarter, adding a fresh urgency to the dilemma.

But Domain chief of research & economics Dr Nicola Powell advises potential buyers to keep calm and carry on. 

“I really believe, having pored over 30 years of housing market data, that housing markets are cyclical, and you go through lots of periods where prices rise and then fall,” she says.

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19 Phelan Street, Clayfield QLD 4011

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“When you’re purchasing a property, it’s for a long-term investment and you are going to ride multiple property cycles, and that’s how you build financial wealth. So if I would give any advice, it would be to buy when it’s right for you. Housing markets are complex and often impossible to predict.”

That’s a recommendation echoed by experts throughout the industry. Ray White Group chief economist Nerida Conisbee says many people have missed out on buying homes after waiting for a price crash which never came.

Instead, prices moved in the opposite direction and left many of them high and dry, and now unable to buy the properties they could have back then.

“The best time to buy is always when you are personally and financially ready,” she says. 

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84 Iliffe Street, Bexley NSW 2207

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“We generally don’t advise people to wait for interest rates because it’s so easy then to become unstuck when they don’t change for a while, and you’re left in a fairly negative position.

“It’s better to buy when you’re ready to. And if you buy now, you’ll still benefit later when interest rates do come down, as well as from any price rises in the meantime.”

The just-released Domain report certainly indicates that price growth will continue, albeit at lower levels than during the pandemic boom. 

The median national house price has now reached $1,094,539, which is 2.1 per cent up on the previous quarter, and 7.8 per cent up on the year.

All capital city house prices are up, except for Darwin and Canberra, with house prices in Sydney, Brisbane, Adelaide and Perth at record highs. 

Melbourne has shown a steady recovery, with house prices rising the most steeply in the past two years. Hobart prices are also bouncing back after six quarters of losses.

Most commentators believe interest rates will be cut this year which will help affordability and buyers’ borrowing power, but may also further encourage more people to enter the market.

“That means there’ll be more competition for properties and prices may well go up further as a result,” says independent economist Harley Dale. “So if you have the financial capacity to buy now, and you’ve seen a property you like and can afford, then I’d suggest you do that sooner rather than later.

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1/76-82 Glencoe Street, Sutherland NSW 2232

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“We’re probably seeing another six months where rates will be on hold, with the first rate cut early in the second half of this year. I think six months before that first rate cut is probably the sweet spot in the market before rates fall substantially.”

In the meantime, buyers can shop around for competitive interest rates from banks, he suggests.

Another issue to factor into the decision is the shortage of good homes up for sale, believes PRD chief economist Dr Diaswati Mardiasmo. She’s currently house hunting herself and is finding 20 or 30 other people turning up at each inspection.

“So if you find a home you love and it ticks all your boxes in a suburb you want to live in and within the right price range that you can service comfortably, then don’t hesitate,” she says. 

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13 Molesworth Street, Coburg VIC 3058

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“There is currently such a scarcity of supply for good standalone houses. It’s not worth waiting.

“We know interest rates are stable and we’re no longer in the shock bubble of them going up every single month, employment rates are good and wage growth is strong. I’ve had friends waiting for prices to fall and they haven’t, and suddenly they find they’re priced out of the market.”

Powell agrees, saying: “If I were a buyer trying to buy, then I’d be thinking it’s now much more about the property than the state of the market.”