If you're thinking about buying a house, the amount of debt you will have to take on is probably enough to keep you up at night.Data from Homes.co.nz shows that the typical value of a first home on Auckland's North Shore is now $777,000. In Hamilton, it is $469,750, in Wellington, $592,300 and Christchurch $382,250.
That means, even with a 20 per cent deposit, buyers are taking on mortgages of hundreds of thousands of dollars, and many times what they earn in a year. It might be enough to make you feel vaguely ill. But there are ways to minimise the debt and stress of a first-house purchase.
This seems obvious. But when the media is full of stories about house prices soaring and all your friends are talking about getting on the property ladder, it can be easy to feel that the time to act is right now. Or better still, yesterday. But the truth is that good times and bad times to buy roll around at fairly regular intervals. Sure, buying five years ago would have got you a cheaper house. But if you do it before you are ready or rush into it, you are much more likely to get burned.
Case in point: Me. I was very focused on buying a house in my early-20s. The property boom of last decade was in full swing and I figured it was better to buy anything than nothing. So we bought a place in Glen Eden, spent a serious chunk of change trying to do it up and then sold it two years later when we realised we were way too young for a life in the suburbs. But the market had dropped and someone else got a serious bargain out of all my hard work.
If I had waited until I was closer to 30, I might have paid a bit more for the property but I would have accumulated a bit more in my KiwiSaver account, too, would have been earning more and would have had a much clearer idea of where I wanted to live.
I would have saved on the misguided renovations and the $20,000-odd paid in commission to the real estate agent who found the lucky buyer.
Wait until you've got a solid job, good savings, and you can commit to holding a property for at least five years. Don't buy just because you think it's your last chance, or all you will ever be able to afford.
Consider your next move
Sure, you want to buy a first home that you can stick with for a decent amount of time. But you should also consider what you want the step after it to be. If you are buying a one- or two-bedroom home, have you thought about whether you want to have children? If you are buying a long way out one side of the city, what would happen if your work changed and you suddenly found yourself having to commute right over to the other side?
Do you see yourself selling the property when you want to move on, or keeping it as an investment? If you plan to rent it, is it something that will attract good tenants and a good rental return? Would it be hard to maintain as a rental property?
Stick to what you can safely borrow
There is an argument for stretching yourself when it comes to buying a first home, but it's important to be realistic.
Is your income reliable? Are you circumstances likely to change – will you want any time off in the next few years? How would you manage if your mortgage payments increased?
Most banks check borrowers' ability to service a loan by looking at how they could cope with interest rates in the mid-7 per cent range.
Before you agree to anything, run the numbers through a calculator such as the ones on Sorted. Look at what your repayments will be at current rates, what they would be at 7 per cent and what they would increase to if rates hit 10 per cent. At the moment that seems unlikely, but double-digit interest rates were common as little as 10 years ago.
If the bank is offering you a larger loan than you are comfortable with, don't take it. If you know you would struggle to deal with a big rise in interest rates, consider fixing for a longer term. You will pay a bit more now but it will provide certainty.
Structure your loan properly
You can save money and get rid of your debt faster by getting your loan structure right. Set it up over the shortest term you can feasibly handle. The faster you pay it down, the less interest you pay. If you set up a loan over 20 years but then your circumstances change, most banks will let you refix out to 30 years once your fixed-term loans expire.
Paying fortnightly rather than monthly gives you two extra payments a year – allowing you to cut down your interest bill painlessly.
But if you do not want to commit to the higher repayments of a shorter loan term, there are other ways. You could have part of the loan on revolving credit. That works like this: Float $50,000 of your loan. Have this in a revolving credit account. Each month, put all your expenses on your credit card. Have your income go into your revolving credit account and sit there for the whole month.At the end of the month, withdraw the money to pay off your credit card. This means you have less of a loan for most of the month - and a lower interest bill. You also have the freedom to pay off this bit of your loan faster, if you can.
The market in North Canterbury continues it buoyant run with buyers still seeing great value in properties all over the region.
We have seen strong sales activity in lifestyle properties in the lower North Canterbury market as purchasers begin to understand the possible upside the Belfast Western Bypass will bring to region by making the city commute less congested and adding potential value gains to properties. In smaller markets north of Amberley we have seen strong uptake of all property types as the roading rebuild through to Kaikoura begins to get underway and sub-contractors begin to look for accommodation for staff.
Add into this strong activity in Kaiapoi, Rangiora and Hanmer the market is looking good for the foreseeable future.
Real estate business Harcourts Twiss-Keir has long been a well-known and respected business in Shirley, and for almost 20 years the company serviced the local area from its premises in Marshland Road.
Unfortunately, damage from the 2011 earthquakes and the subsequent economic downturn meant the office had to close, franchise holder James Twiss says.
“Despite being closed, we have never forgotten the strong roots we had in the area, and although we have wanted to come back, the limited amount of commercial space in the area for a property business prevented it,” James says.
“However, we have always kept an eye out for something suitable, and about two and a half years ago the opportunity arose to purchase a site at 39 Marshland Road.”
Following the lengthy rezoning and consent process, the property, an art deco style residence built in the late 1930s, has been completely renovated throughout, transforming it from a residential home to a real estate office.
“It’s quite a unique building in the way it was constructed and we wanted to keep the original layout,” says James. “It was quite difficult to work with so it was an interesting process and we are thrilled with the results. We are now based back in Shirley where we had always intended to return, and we are looking forward to helping the local community with their real estate and property management requirements again.”
A full service real estate office, Harcourts Twiss-Keir provides sales and listings for all residential and lifestyle properties, and will have up to 10 salespeople in the office, together with administration staff and property management specialists.
Arguably the most recognisable real estate brand in Christchurch, Harcourts was voted the most trusted real estate brand in a Readers’ Digest survey for four years running.
“As the largest real estate business in Christchurch, for Harcourts the well-established residential area of Shirley is an obvious place to be, and we are excited to be back,” says James.
Traditionally this time of year is busy, but media reports have been telling us the market was quietening. This may be true for the larger markets such as Auckland and Christchurch but for us this is not exactly the case.
We are now seeing a number of comments in the media that the regions are now seeing price increases due to demand not seen for a couple of years. We can see this in our figures, prices are rising and activity is strong and we believe this is twofold, one because of the value for money offered in our region, within a short commute to Christchurch (and possibly prices in the city having reached a ceiling for the medium term) and two because of positive net migration. Why? Because people coming to NZ can see the regions as being true New Zealand and one of the reasons they left their homelands was to get away from the large cities, the hustle and bustle and experience living in tight knit communities such as ours.
If you are thinking of selling be confident that the market is strong in North Canterbury especially in our award winning offices!
Ask any new homeowner to describe what convinced them that this house was the one, and you'll hear one word come up over and over again: "love."
Buying a home, after all, is a highly emotional event, so when the right place comes along, would-be buyers get giddier than a teenage girl heading to the school ball.
A recent study by economic think-tank Kiplinger surveyed thousands of recent homebuyers to determine the most crucial elements in making them "fall in love" with a house. And we've added a few tips to help would-be sellers create that emotional magic with their own homes.
A KNOCKOUT FRONT DOOR
Love at first sight must happen with homes, too, because this was number one on the Kiplinger list. We all know that first impressions count, and the front door is a key part of making one. It should stand out from the crowd, and give the potential buyer a sense of what they'll find on the other side.
The easiest fix is to paint the door a bright but complementary colour, or stain a wood door to match the porch railing or hardwood floors just inside. Potted plants will add a punch of colour — and go for fewer, larger pots for the most visual impact.
You also might want to consider a door style out of the ordinary. Perhaps a Dutch door, double doors with transom windows, or an antique door. Any style can offer an opportunity for you to try a paint colour that brings a smile to your face as you enter.
Once inside the home, high ceilings are high on the list of wow-inducing features.
How can you capture the magic if you haven't got them? The big fix, of course, would be a remodel — by vaulting the ceiling or knocking down a wall. But if that's out of the question, paint your entry white, ceiling and all.
Another tip is to position art slightly lower to give the illusion of high ceilings and a sense of spaciousness. Or, using the same concept, try hanging a mirror so that a window can be reflected in it.
Some decorators suggest hanging curtains as close to the ceiling as possible, and letting the fabric hang down to the floor. The strong vertical line will visually expand the height of the room.
STANDING OUT IN A SEA OF SAMENESS
Drive through the outskirts of Auckland and other metro centres, and you'll notice residential developments are expanding at an ever-increasing pace. Turn into the streets of those new neighbourhoods, and it's soon apparent that all the houses look (more or less) the same.
And that's to be expected. But once you move in, or if you're thinking about selling, you'll probably want your house to stand out from the crowd.
If you find yourself living in a home that looks like every third house on the street, the first plan of action should be to paint the house, the trim, and the front door with three complementary colours. Head to the paint section of any home improvement store, and you'll find a raft of brochures with colour schemes. Then add features like flower boxes, new light fixtures, and updated house numbers.
GOOD BONES — AND MAJOR POTENTIAL
In today's economic climate, few buyers can afford to purchase a house that is exactly the way they want it. Fixer-uppers are the norm, and in many cases the opportunity to take on a project is part of the excitement of buying a home.
According to the Kiplinger study, the majority of homebuyers wanted a home that was done enough to live in, but with plenty of opportunity to make improvements and make it their own.
"Good bones" is a phrase we often hear ascribed to an older home, but what does that mean?
Simply put, "good bones" means that with some TLC and cosmetic changes, the house will have the charm and character you want because it has started with all the foundational elements you need. While old homes tend to naturally have this character, newer homes can have it, too — so if you're on the hunt for your next home, keep your eyes peeled wherever you go.
Figures released yesterday by Statistics New Zealand shows there was record migration in 2016 – with our population increasing by a massive 70,600.
Juxtapose this information with talk of our property market going into decline, and the two do not marry up.
As we’ve said before, the key forces that have fuelled the market so far – high levels of immigration and low interest rates – remain unchanged.
Immigration is particularly key when you look at the Auckland market. Approximately 60% of migrants stay in Auckland when they arrive in New Zealand. That’s about 42,000 people requiring houses. What that translates to is a need for 14,000 houses a year for an average household occupancy of three. That’s on top of an estimated existing shortage of about 20,000 houses.
At current levels of construction there are no indications that supply will begin to meet that demand, and no sign from the government that immigration will begin to tail off.
It’s important to reiterate it’s not purely immigration fuelling the market around the country. Our economy has grown 17% since 2007 and continues to grow. That in itself generates confidence and activity.
However, we have seen a fall in the number of property investors in the wake of the tougher loan to value ratio (LVR) restrictions introduced in November.
With investment dropping away a little, will the market remain at the same speeds that we have seen in 2015-16?
It has felt like that for much of 2016 market commentators and observers were willing the strong, highly active market to fall over dramatically, particularly in Auckland. At this point, however, that seems unlikely to happen any time soon.
First, it’s important to remember that a market cooling, isn’t the same as saying a bubble is bursting. It’s just merely returning to the healthy activity levels of prior to 2014-15. What we should be left with through this year is a more balanced market across the country that still allows room for growth, but perhaps doesn’t move so far so fast, shutting some out altogether. 2015 was an unusual year and coming back a little from those levels of sales and inflated prices does not mean disaster.
Interest rates are the unknown quantity. Banks are beginning to raise rates and we’re likely to see the Reserve Bank adjust the OCR. Will it be enough of offset the thirst for property still in the market? That is highly doubtful given our net migration levels and resulting demand.
Supplied by Chris Kennedy CEO Harcourts
January was excellent for Twiss-Keir with strong sales and outstanding listings. The market throughout North Canterbury is buoyant with properties further from the main centres showing activity not seen for many months.
Reading an article yesterday confirmed with me this was indeed the case. “As house price growth flattens in Auckland, Christchurch and Hamilton, it appears the new property hotspots are in places that once struggled to sell a house”.
Exciting news for anyone thinking of selling at present. Don’t forget to give us a call.
Harcourts are mostly known for selling real estate – be it residential, commercial or lifestyle. What a lot of people are not aware of is our Property Management services. Property Management has become an essential service within our business and in all our markets we are the largest dedicated Property Management team.
At Twiss-Keir we were early adopters of Property Management as a tool that sat side by side with real estate sales. We understood that Property Management is an obvious essential that many investors would take advantage of if it was offered. Often investors would ask us for rental assessments on properties they may wish to purchase which lead to them asking the simple question – can you manage my property for me.
With extremely high minimum standards, strong work ethics and a principled approach we have grown our Property Management department from one person in 2006 to a team of 10 spread across our four branches. Included in the team are multiple Property Managers, two assistant Property Managers and New Business Manager.
We are unique in North Canterbury not only because we have a standalone Property Management division but that we have more than one person in our team and we have the only New Business Manager in the region. The reason – we are good at it and have a proven track record which creates a continued business relationship with our clients.
We offer a service second to none and in doing so we have seen significant growth in our Property Management division over the years. We pride ourselves on putting the client first and rarely have concerns.
Property Management itself has been slowly adopted by the North Canterbury market. When we first entered the market offering Property Management we saw a strong push back from traditional investors who tended to own one or two properties they managed themselves. Over time as people become more time poor and tenancy legislation becomes more and more difficult to navigate we have seen a trend of traditional landlords coming to us to assist in the management of their investments.
Investing in a Property Manager is the best investment you can make. They take the stress out of managing properties in several ways including giving you anonymity from your tenants, ensuring the property is clean and tidy always, keeps rents a market rates and can navigate through tough situations lay people may never be able to get through. Our experts essentially make your life a lot easier and take the strain out of your life all for a very fair fee.
Personally, I have used Property Managers in all my investments. I believe them to be an essential and whenever I purchase I build their fees into any calculations I make as they are a non-negotiable. If you have an investment property you should be at least talking with one of our award-winning Property Management team to see how we can help you. You will be surprised at the value you receive and the stress that will be released.
I was reading an article in the Central Christchurch Mail this morning that I thought I might share as I found it interesting and also it is one article that is written about our local market rather than the Auckland market that tends to dominate the media in New Zealand.
Christchurch's recent rating revaluations have pushed up selling homeowners' price expectations. The Real Estate Institute's latest report shows the median sale price in the city during November 2015 was $465,500, an annual rise of 4.5 per cent.
Institute director Jim Davis said that in the past fortnight, as happened every three years when new rating valuations were announced, some owners had "got big ideas" about prices. Christchurch City Council revaluations released on November 29 put the average home value at just over $500,000, a rise of 7.3 per cent in three years.
"People think 'My property has jumped up in value'," Davis said. "But that's been happening gradually. The rating valuations are based on sales history, they're catching up to what has already happened with prices." Rating valuations were also a broad-brush measure not intended to give an accurate market value, he said. Davis said real-estate agents "would be having a few of these discussions with sellers" and things would settle down again quickly.
The institute's figures show the city's real estate market is one of the country's steadiest, with post-earthquake housing development putting the brakes on high housing inflation. The November median price was a record, up from a previous high of $459,000 in September.
Regardless of the excitement over revaluations, Davis said the market was well balanced between buyers and sellers. Homes were selling well and there were plenty for sale, he said. First-home buyers were becoming more active as they understood lending rules reworked by the Reserve Bank earlier this year.
The institute's report said the median November sales price for Canterbury Westland was also a record at $440,000, up 4.5 per cent in a year. Median prices within the region included North Canterbury country $390,000, Mid-Canterbury $326,500, Timaru $353,350, South Canterbury country $297,000, and West Coast $170,000.
The number of sales in both Christchurch and the region were down slightly from a year ago. Listings were already slowing in the lead-up to Christmas and he expected house-hunting to slow down next week. The market would likely pick up again quickly between early and mid-January.The report showed homes in the region were taking an average of 32 days to sell.
Many parts of the country recorded annual price rises in double figures with the Queenstown Lakes area showing the biggest jump. The national median sales price in November was $520,000.
Licensed Business Owner of Harcourts Twiss-Keir Realty
Licensed Business Owner of Harcourts Twiss-Keir Realty