Ask Paul: Buy Sydney property now or wait for prices to drop further?

Q. We're looking to enter the Sydney house market at $650,000 in an owner-occupied residence in the next 12-18 months.

Analysts' suggestions range from no capital growth to a 5% fall in the Sydney market.

If we're not expecting capital growth, should we keep building a deposit until there are signs of growth, then enter with a higher deposit?

What are the pros and cons of entering the market now, with small growth prospects?

We're saving $36,000pa, we currently have a $130,000 deposit and we will just be above needing mortgage insurance. - Casey

A. The good news for you, Casey, is that, as you say, for the first time in years the Sydney market is slowing.

This is nothing to do with the long-term outlook for property. The city's population continues to grow rapidly, job creation is excellent and while infrastructure is always going to lag population growth at least there is a lot of construction.

What I think is super important is that you buy a well-located property.

Transport will not get any easier as the population grows, so access to public transport is critical. Lifestyle is a huge driver of future property value, so I am always keen to own property near lifestyle facilities - and a good coffee shop.

I am not fussed about when you buy. You have a great deposit and an excellent ability to save so there is no need to rush in.

I think the market will be pretty weak but there are only so many good properties.

If you see one at a decent price, I'd buy it. Sure, in the short term it may not grow in value, or may even fall for a year or two; however, the long-term outlook in big cities like Sydney as well as bigger regional centres looks very sound.

Timing any market is a mug's game; we'll never get that right.

For some 40 years I have just bought quality shares and well-located property when I could afford them and then hung on.

Time, by which I mean holding the shares or property for the long term, and a growing population and economy mean it is hard for decent investments not to do well. What can catch you out is too much debt, so apply common sense to how much you borrow.

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