Australia has still technically avoided a recession – but some housing markets are feeling more economic pain than others.

While high-priced property is struggling in prime blue ribbon suburbs, affordable first home buyer hotspots are thriving thanks to first home grants and the lowest interest rates in 49 years.

So is now the best time to seek out a bargain and buy? Or is it right to be paralysed by fear? Here’s what to know:

1. Market fear can equal market cheer

It’s always better to buy in gloom and sell in boom. Experts are divided on the short to medium term performance of residential housing markets, so it’s definitely not a risk-free proposition. While BIS Shrapnel is predicting price rises of up to 22 per cent over the next three years, not all property economists are so optimistic. “No-one really knows what will happen with interest rates and inflation during that time,” says SQM Research analyst Louis Christopher. Rismark International managing director Christopher Joye researched Australian property prices during the recession of the early 1990s and found prices actually rose during that time – so it’s not out of the question that a down market can bring a good result.

2. Spotting the bottom

While none of the experts agree whether house price falls of close to 7 per cent between March 2008 and March 2009 will be the end of the fall out from the economic crisis, economics professor Steve Keens still claims housing markets have further to fall. But sales volumes are up in some parts of Australia, and Australian Property Monitors has reported auction clearance rates of more than 75 per cent in Sydney and Melbourne last weekend.

Most areas seem to have suffered some kind of price drop – especially if they are too expensive to appeal to first home buyers. Part of your research into buying should look at price trends, and if there has been a recent history of price declines in the last 12 to 24 months, followed by price rises then that particular suburb may have bottomed out.

3. Well planned buyers only

This is not the time to be borrowing large sums of money to take on a risky real estate purchase. In a global environment of declining asset prices and tougher lending criteria, this is the time to have a solid deposit saved. Buying with a 10 per cent deposit is what SQM’s Louis Christopher recommends as a minimum. He also suggests thoroughly researching prices and inspecting properties in a shortlist of suburbs you plan to buy in. In tough economic times, research is everything.

4. Gearing for safety

The higher the deposit you pay on a property, the more equity you have in it. While it’s true that tying up all your equity can take away an emergency cash buffer or the opportunity to invest elsewhere, it does mean you have lower monthly repayments and better “gearing” to ride out any future risks. The more equity you have in a property, the easier it is to refinance if you strike any hiccups or have to sell to realise your assets.

5. Borrow comfortably

Just because the bank says you can borrow a large sum doesn’t mean you can afford it. The American sub-prime housing crisis happened because thousands of people were lent money they couldn’t afford to pay back. Only you know how much you need to survive on each month. Only you can factor whether your future goals include having children, travelling or taking a career break. A good rule of thumb is not to borrow an amount that makes you pay back more than 30 per cent of gross income. Banks used to consider a “safe” mortgage one which totalled no more than three times a buyer’s annual family income.

6. Buying for the long term

Whether there is still market pain to be had or not, it makes sense to buy real estate for the long haul. Property cycles can take 10 to 15 years to go from bust back to boom again, and every local housing market will behave differently. Whether you are investing, upgrading or buying your first home, you must plan to stay put for at least five years and ideally longer.

7. Every market is different

National housing trends don’t really mean anything. Understand the dynamics affecting the property market in the area you seek to buy – what’s the local job market like, how have prices moved recently and what’s the average time it takes a house to sell? It doesn’t matter if house prices fall next year, particularly if you don’t plan to sell next year. If the goal is to hold property for the long term, you can’t really lose. Property has always been an investment in shelter for families. onthehouse.com.au Managing Director Michael Fredericks believes, if you stick to a long term plan in the property market and do your research, you can outdo an investment in shares every time.

Do your research! 

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