The Real Estate Institute of NZ released a survey report last week that had some interesting findings for people looking to buy their own home.
This survey gathers the views of licensed real estate agents all over New Zealand regarding how they are seeing conditions in the residential property market in their areas.
They are asked how activity levels are changing, what the views of first home buyers and investors are, and the factors which are affecting sentiment of those two large groups.
For first home buyers, there are a couple of things to note:
They are NOT worried about:
- The number of listings available.
- House prices being too high.
- Job security.
They ARE worried about:
- Rising interest rates.
- House values dropping after they have bought.
- Difficulty in getting a mortgage.
Let’s take a look at each factor that people are worried about…
Rising interest rates
Yes – rising interest rates make it more expensive to own a home, especially when you locked in at 2.6% two years ago and are now facing the prospect of your interest rate starting with a 5 or more likely a 6.
To put this in perspective, it comes back to affordability – are you able to afford the mortgage payments without having a detrimental effect on the rest of your life?
Banks aren’t in the business of putting people into positions that they cannot maintain, so if you can’t afford to buy they house that you want, you simply won’t be given the finance.
But, if you look at what’s happening to price levels across the majority of the country, maybe that house that you couldn’t afford last year has now dropped to a price that you can afford this year?
Again – it comes back to affordability. Have you done the numbers for your own budget? Do you know what the mortgage repayment on that house is going to cost you per fortnight?
Do the numbers – you might be surprised.
House values dropping after you have bought
If you’re buying a house to live in for a long period of time, this is irrelevant.
It might feel bad to see the value of your house go down, but in real terms, this has very little effect on your day-to-day cash flow and life.
For many people, buying a house to live in is about getting out of the rent trap, establishing a permanent place to live and having a solid foundation to start a family.
If you’re worried about the value of your house going down in the short term, you’ve forgotten why you bought the place in the first place.
Yes – it is slightly demoralising to see your home go down in value, but if you’ve bought the place to live in for a long period of time, worrying about this is a waste of energy and time.
So – forget about the value of the place and concentrate on ways to pay the debt down faster, increasing the value of the place or increasing the amount of cash that you have left over at the end of the month.
Difficulty in getting a mortgage
This one is easy… give me a call…
In all seriousness – I’ve seen some positive signs from the lenders lately that they have started easing their policies when it comes to first home buyers.
This is not to say that they have opened the floodgates, but they have adjusted in ways that has made it easier for people to get access to a home loan.
It’s a mortgage brokers job to help their clients understand how they can get themselves into a position to buy a house.
You might not be able to do it immediately, but we can help you to take actions that will improve your chances over time.
So, if you’d like to see where you stand, make contact and we’ll take it from there.
Tim Oliver is a Financial Adviser and director of First Mortgages NZ Ltd and Oliver Financial Planning Ltd. The information provided in this article is general in nature and is not intended to constitute advice to any person.