Buy a House Now or Wait for a Price Correction?
24 May 2016
Popular market sentiments suggest that home buyers are sitting on the fence, i.e. they want to buy a home, but are indecisive. There are a few reasons for it - either they have not found their dream home yet, or they have found it, but waiting for the home loan interest to reduce or for a price correction. Majorly, real estate price recovery is the most common cause behind buyers' indecisiveness.
Curious homebuyers receive information from different sources. They hear or read news about housing prices bound to come down soon. Many also think that prices correct uniformly and simultaneously across locations, which is not the case. As a result, they do not want to take the risk of facing a loss by making a purchase decision at this point of time.
Homebuyers and investors are hopeful that the lowering of interest rate of 50 bps by RBI would revive the real estate market in future. Mr. A.S. Sivaramakrishnan, of Residential Services India, CBRE South Asia Pvt. Ltd. said, “Although the Central Bank did implement monetary easing during the first half of the year, the actual impact on mortgage rates has been far less. However, going forward, further measures of monetary easing and reduction in mortgage rates can have a positive impact on housing sales across the country.”
However, does it really make sense to wait for a price correction? It is actually always a calculated risk. Prices may not come down as predicted, or may even rise. In case the price rises, the buyers will have missed the opportunity to buy a home at a lower price, or the home that they wanted the most may be sold out to other buyers.
An investor, who is not looking to buy a property for personal use can afford to wait for the prices to come down. This is because he/she always has other opportunities if the prices do not come down. However, an end-user buys a home after a grueling search about its location, size, amenities, and many other components. If he/she waits for price correction, one risks losing a lot more than just money.
There are occasional fluctuations in the real estate market and these do not guarantee a major slashing of prices. Owing to the pace at which the country is developing, real estate prices are most likely to rise. Hence, home buyers should identify the properties that they desire the most and then negotiate a good deal with the builder.