NZ 1st homebuyers are ScReWeD...

[minimoke]

your absolutely right... they look at housing as a 30 year debt ridden life...
New Zealand way of living....
that is why I stipulated that through waiting through the boom, you can cut that mortgage from 30 years to 10 years until fully repaid.....
c

I’ve said earlier that debt shouldn’t be frowned upon –its just a commitment to repay someone for the pleasure of the use of their money. I intend dying in debt.
The risk now of riding through the down cycle is that the hopeful first home buyer has a job or steady income to save enough for the deposit and where are they going to put those savings. It looks like dodgy Finance Companies is the place to go at the moment – and there is some irony that these investors have put their money into property via Mascot and not lost a bean.

[Crypto Crude]

hey mini,
yup debt is a good thing... I totally agree... leverage...

But, dont take on extra debt when its unnecessary...

Your pretty much saying that you want more total debt for the sake of it....
Are you saying that if you and I for example had the same loan amount, and same loan features, (term, int rates etc) that you would pick the loan which has higher total payments even though the two loans are identical?


10yrs or 30yr loan term, for the same house....
which one do you want?
sounds like you want the 30yr....

.^sc

[Crypto Crude]

Hey upside,
we should catch up soon....
im not sure if your in kiwisaver or not... IF not get in right away dude...
we are in for one cheap house...
check this out...
if we are in kiwi saver for 3 years then we can get a 5k subsidy from the government, making a total contribution of 10k....
5k can come out of our funds but reducing the size of our funds...
Ive been in one year plus a few months.... im going to wait two years until I buy...
brain haemorrhaging until then...
we need a doctor, this is so sick...

.^sc

[minimoke]

hey mini,
yup debt is a good thing... I totally agree... leverage...

But, dont take on extra debt when its unnecessary...

Your pretty much saying that you want more total debt for the sake of it....

Lets see if I can give you a real life example. I recently bought $20k of carpet. I estimate it will add $40k to the value of the property and have a life of 10 years. I could have: saved up for it; used an HP facility; paid on credit card or increased the mortgage.

Saving is an option. Except with the NZ$ rate I figure there is a risk of inflation of imported product. So by the time I’d saved $20k the price might have gone up. I guess I could have paid a deposit to secure a price – but there is a risk of the retailer going out of business and me losing my deposit.

HP is out – haven’t done that for years and can’t be bothered looking into it.

Rang the bank, the manager came to me with the papers and I signed up for another $20k of debt. Why – Well $20k will cost me $1,200 a year plus a bit to pay off the principal – all up that’s about $3,200 a year. If I sell the property today I double my money. If not I get to live in a place with great carpet. If property’s devalue by 24% (the famed 30% devaluation less the 6% its already supposedly dropped) I only loose $10 k – which means I’m still $10K up on my $20k.

But there’s more. Knowing I could buy I was able to put some pressure on retailers with the biggest quote being $26k. A bit of arm twisting got me a better deal. Put it on the credit card – which gives me a month or so free interest plus I get enough air points for a flight to Oz in winter.

Since then I got a bit more cash than anticipated so I’ve flung that $10k off the $20k I borrowed so now I have my $40k of added property value, $10k debt, an instant 6% return on the $10k extra I found by paying off part of the debt, a trip to OZ, and an extra credit line of $10k. So now the debts costing me $600 a year but for every extra dollar I pay off the debt I’m getting a 6% net return on the cash.

I’m not uncomfortable with that position since my net asset position is $30k better (which i can use for extra leverage) plus I have another $10k line of credit pre approved. Oh - and a trip to Oz and I’ve helped a retailer and tradesmen out.

I could of course have exercised some restraint and not bought in which case I’d have no debt, be $10k cash better off but with no added cash line and I’d have to pay for that trip to Oz. And I’d be mooching around on crappy floors.

[minimoke]

sounds like you want the 30yr....

.^sc

Yup, sure is!

[Crypto Crude]

your not thinking right mini...
why would anyone in there right mind want to make payments for 30years on an expensive house.... when they can wait 5 years, get a smaller loan, lower interest rates, and have the same house paid off in only 10 years...
think about it...

.^sc

[minimoke]

your not thinking right mini...
why would anyone in there right mind want to make payments for 30years on an expensive house.... when they can wait 5 years, get a smaller loan, lower interest rates, and have the same house paid off in only 10 years...
think about it...

.^sc

Except historically, even through poor times property values trend upwards and I can’t find any five year period where values are significantly lower than five years earlier. History would point to a house today having a higher value in five years time. Back in ’98 it was all “woe is me – prices are going to drop by 40% boo hooo” – but what happened: a bit of flattening out and in 2000 we are off again. Early ‘90s there was a bit of a dip before someone lit a rocket. Early ‘60’s unremarkable growth (but growth) and then early ‘70’s away we go again. Even during the 30’s values in wellington didn’t drop dramatically. Sure building permit numbers dropped in the late 30’s but so did the population – and then what: off things went again after ‘44.

Also consider people on average stay in their house for around 7 years (i think that rate is dropping back). So in 10 years you will have traded – and probably traded up which means a new mortgage. There’s no way I’ll be in the same place for 30 years. Onwards and upwards

The other issue is commitment. If you are committed to a 10 year loan that’s great –but you will find all your energy goes into meeting that commitment, with probably little opportunity to divert from your chosen path. Take a 30 year commitment there is lots of opportunity to come and go and do what you please – as long as you keep the payments up.

No-one I know has a crystal ball that clearly says house prices will be less in five years time than today, interest rates will be low, deposit amounts achievable, repayment terms acceptable, jobs are around that pay enough for to repay the loans of the future. These are all unknowns. What is known is what you commit to today – you then just have to manage that commitment. An as an aside a real good employee is one with a mortgage – they understand commitment.

[Mick100]

Spoken like a buff of buffs minimoke

Your probably right - nominal property prices keep trending up but what about real property prices? Do you take account of inflation when looking at price trends

I would bet that real property prices fall over the next five yrs assuming that there will be inflation at some stage. If we stay in this deflatioary bust then real prices as well as nominal prices will fall.

PS, did you see "close up" tonight - looks like theres a few mortagee sales coming up over the next 6 months. Big layoffs are mentioned daily on the news in recent times - this will add to the number of people who can't make mortage payments
I expect that the high number of mortagee sales will eventually depress the value of the entire county's housing stock

Hang in there shrewd

[minimoke]

Spoken like a buff of buffs minimoke
Y

Mick100
If you look at nominal and real price trends you’ll find they follow a roughly similar path – there are falls and rises – but always consistent growth over time. Same is happening now – same will happen in the future.

There’s no surprise there are mortgage sales coming up – there always have been, there always will be. What we are seeing now is the term “mortgagee” being incorrectly used in marketing collateral. I’ve posted earlier examples on trademe of “mortgagee” sales which clearly weren’t.

And you can’t read that mass redundancies = mass mortgagee sales. Look at who are being made redundant. The majority are minimum wage, low / semi skilled workers – with a number of them in twighlight industries. For example the Pacific Brands layoffs – those people have been on borrowed time for ages. Gunn Veneers have been hanging on by the skin of their teeth for a decade. These people are going to fit nicely into the “renter” demographic – not the home owner demographic. Home ownership has always eluded minimum wage people – always has, always will.



Redundant people need somewhere to live. They may move out of their owned home but where do they go – into a property owned by a landlord. I have not seen one or heard one news item that suggests we are looking at creating tent cities – but you heard it here first – watch out for this expression to be used when the media and personality driven self promoters run out of interesting things to bluster on.


I have no sympathy, nor particular interest in low doc or high risk borrowers who go to the wall – the writing was on it the moment they signed the mortgage document. None of us should read anything into that news other than the inevitable.

The bottom line is that a house today is going to cost the first home borrower more in five years time. Just like Shrewdys $330k Jan 07 house is going to cost him more in Jan 2012. Whether he has saved enough for the deposit, meets the loan eligibility criteria or can afford the repayments has yet to be determined. He probably will. But he will be facing a 10 year mortgage and I’ll have knocked 1/6th off my “30” year one.

[Tok3n]

If you were in your late 20s and can buy a relatively decent 1st home in Auckland (around 550K mark) in cash, would you guys do it? or take on a little debt? to keep some cash etc?

Deposit rates dropping like a stone for savers but pyschologically, watching all savings disappear into a home is quite difficult too.