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Residential property market survey

Although bank reports are often as dry as a brick in the Sahara the latest residential property market survey done by the BNZ has some interesting information if you care to take a look. Truly. It’s on their website.

I noted a couple of things.

Firstly, that first home buyers are active in every region across the country. Which would seem to match very closely what we’re seeing too. After all, they’re the kind of client we most often assist.

Secondly, that prices are perceived to be rising. Whether or not that’s really happening is almost irrelevant – perception is reality. Having said that we’ve had several clients just recently really pushing the boat out to ensure they’re putting their best foot forward in order to buy a property so if prices are rising I’m not surprised. Especially in Auckland which always leads the way in terms of property price rises.

Thirdly, that the main reasons for sales failing to complete is because finance cannot be obtained or because building inspections reveal problems. No doubt the two are related but I still have a niggly feeling that some people are going into a buying situation without a pre-approval. God knows why you’d put yourself through the heartache but it still happens.

It seems some lessons are worth repeating:

The starting point for any home buyer is to get your pre-approval sorted. That’s true even if you have tons of equity built up over the years because lending criteria can and does change. What might have seemed all too easy 5 years ago may not be the walk in the park you remember. The GFC changed all that. Understand what you can and can’t do (financially) and you’ll be in a great position to be decisive and act quickly. Both great attributes when negotiating a house purchase whether it’s your first or fifth time.

The leaky building crisis still casts a pall over the property market and wise buyers will take the precaution of getting a building inspection done so as to avoid buying a lemon. Even if the house appears to be in perfect nick I’d still say you get one. Why? Mostly because they always reveal something that needs repair and you can use that to your advantage in terms of squeezing a lower price out of the vendor. If spending $500 on a report ends up saving you $10,000 it’s money well spent I say. If it reveals a house in perfect nick so much the better. The main thing is you didn’t end up buying a problem. Then it really is money well spent.

Buying a home ain’t easy!

So you decide to go house hunting and wouldn’t you know it, the first house you see is exactly what you want and at the right price. It’s a great deal and it’s staring you in the face. But you find yourself hesitating, unsure if you should make an offer or not. What’s holding you back man, it’s perfect?

Buying a house is never as easy as some people make it out to be. Especially if you’re a first home buyer but it can be just as traumatic for more seasoned punters. From our experience we know clients hesitate because they don’t have the right knowledge to make a decision. Here are 5 tips to make your search a bit easier.

Get finance pre-approval first

If you know how much the bank will lend you can narrow the search to properties that are within a specific price range, location or a specific type. Why waste time looking at properties that will never fit the bill?

Go hard, go fast

Once you’ve got your pre-approval you should hit the open home circuit, hard. In the first few weeks aim to look at as many properties as you can. This way you get a really good understanding of what a ‘good’ property looks like and what you’re prepared to pay for it. This is hard work but well worth it.

Find out why the owner is selling

Understanding why a house is being sold may help you negotiate a better purchase.  For example completing the purchase sooner in exchange for a price reduction may suit a seller who needs to relocate urgently for work.

Be inquisitive

If a property looks good but appears cheap you need to understand why – are there hidden problems with the building or maybe the seller under pressure from his bank?

Get a team of ‘experts’ to help you through the process

Every property transaction requires conveyancing which normally means you need a lawyer. If you need finance then you need a mortgage broker. A building inspector and valuer are useful people to know. There may be others as well but it really is important to have a tight group of people who you can help you through the process.

Is now a good time to buy a house, part 2

Recent newspaper reports back up what we’ve been hearing anecdotally – that in some parts of the city the demand for rental housing is so high that landlords are able to extract premium rents.

In fact I met with a young family last week who were recently arrived back from a few years working in Australia. They’d been staying with family while they looked for a house to rent and were surprised by what you could get for the level of rent they were willing to pay. It wasn’t what they expected at all.

“We might as well buy something if that’s all our rent gets, its dead money anyway”. Too right.

So we did some numbers and are now in the process of getting mortgage pre-approval for them. But here’s a look at the size of mortgage different rent levels will get you.

Weekly Rent Loan size
$300 $233,000
$400 $310,000
$500 $388,000
$600 $466,000
$700 $544,000

These figures come from the calculator on Westpac’s website and assume a 25 year loan term, an interest rate of 6.10% and a deposit of about 10%. Current as at 11 Feb 2011. T&C’s apply.

Lets compare:

In Kingsland $700 a week gets a 4 bedroom villa with a carport on a tight section but you could buy a 3 bedroom house with carport and a bit of lawn in Avondale for a much more palatable $500 a week.

In Milford you’ll pay $600 a week to rent a reasonably modern 3 bedroom house with double garage but why not move up to the beautiful Hibiscus Coast (I’m biased cos live there) and get a 3 bedroom house on just under a quarter acre for about $500 per week.

Yes, if you’re renting in the inner city moving to the suburbs might mean a bit more commuting. Having said that, if you can come up with the deposit (or parents let you use the equity in their house) you may be able to buy a cool apartment and stay put.

At the end of the day there are several ways to skin this ‘i want to buy a house’ cat. The first step is understanding what you can actually do (that’s what a mortgage pre-approval is all about) and taking it from there.

So with inner city rents as they are, maybe now is a good time to get serious about a house? It costs nothing to find out.

 

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