NZ 1st homebuyers are ScReWeD...

[kelfy]

This is the first article of this thread which is written on 2007. I bought a unit at the end of 2006 which cost $300k. Now is year 2016 and the value of return is great. It wasn't ScReWeD ​at all.

New Zealand is at the beginning of a first homebuyers crisis...
lets assume NZ median house price is $330,000 .... and you pay a piddley deposit of $30,000
-also assume interest rates are 8%
-number of years to pay the loan off are 30 years
-loan amount is $300,000, after deposit is paid

you therefore get....
Year 1 2 3 4 5 6
Beginning principal bal 300,000 297,352 294,492 291,403 288,067 284,464
payment 26,648 26,648 26,648 26,648 26,648 26,648
interest component 24,000 23,788 23,559 23,312 23,045 22,757
principal component 2,648 2,860 3,089 3,336 3,603 3,891

-and so on, for 30 years
-in the first year you are paying $24,000 in interest only... wow... and only $2,648 is coming off the loan balance at the end of the first year...
-so, your house value has to increase 8% in the first year... (24,000/300000) just to break even and cancel out payment for interest only (8%)
-year 2 opening balance is year 1 beginning principal balance less principal component
and so on...
-so for 30 years you are paying $26,648 per year or $512 per week, every week.....
-total amount paid to the bank after 30 years is $799,440 ...[:0](26,648 * 30)
-the above example doesnot include the benefits of what you save in rent by having your own house

I have only ever been told to buy a house, by parents, friends, every single person I have gone to, to ask for advice has told me to buy a house... The housing success stories are all to common for people who are 5plus years older than me and beyond...

but yet, I look at the above loan amortization table... and cannot see a path...
I am 22, student, without a house (of course)... and cannot allow myself to be a 52yr old man, and have a house only... so I looked for another means... I spent two years just looking at shares, and the last 2 years playing high risk shares, with much success I add... I applied a simple strategy where I invested in high upside, low downside... trouble is finding a share with these characteristics... any way....
It is always a goal of mine to have a house... but It will have to be paid largely in cash...

Or I will need a combination of a few events happening...
-house price falls dramatically
-interest rates to drop, (not likely in the next year) but interest rates will drop in the medium term
-rental rates to increase dramatically, so house buying becomes more attractive
-wages to go up massively (yeah right)
-large govt incentives...

we are due for a housing fall... If you are a first time house buyer, dont be fooled into housing by others... let the numbers speak for themselves...the only way to make house buying attractive is large front end payment, or up weekly payments.up $500, yeah right...
any more than 15years spent to pay for a house is far toooooo long!...(for me)

at $500 per week for 6 weeks equals 3 thousand, a nice sized share parcel... we are going to be a generation of renting property, or inheritance... I want neither...

they say there are risks in buying a house... no theres not... theres no risk in doing what everyone else is doing, because at the end of the day everyone will be in the same boat... and either all better off, or all worse off... there aint no risk in that...
to get ahead in life you have to take risks....

I have heard that many property buffs are changing their views on apartments... I heard of apartments selling recently as low as 55k in auckland...
if you are pondering a first home, then all the best, wheather you buy a house or not, it will still be the largest decision you will ever have to make
Thank you for taking the time to reading the above...

[ari]

With all the land being released by Govt, why not take the land issue out of new build equasion and Govt lease the land to new home owners.

[G on]

Govt leasing would be modeled on maximising return on investment and would be like having a mortgage that would never end. Would only work if all land was owned by govt since Treaty where there was no other option, IMO. It would need a benevolent govt tho.

[fungus pudding]

With all the land being released by Govt, why not take the land issue out of new build equation and Govt lease the land to new home owners.

No benefit unless land lease is less than interest on capital required to purchase. Wouldn't make sense for either lessee or lessor in current economic environment. Besides the prime lender, usually a bank, will often view leasehold tenure as a less attractive security than freehold.

[Sgt Pepper]

No benefit unless land lease is less than interest on capital required to purchase. Wouldn't make sense for either lessee or lessor in current economic environment. Besides the prime lender, usually a bank, will often view leasehold tenure as a less attractive security than freehold.

Just thinking about the comparison to the most febrile property market in the world London. Significant chunks of prime residential real estate is and always has been leasehold. Doesn't seem to stop Barclays, HSBC from advancing mortgage finance to eager buyers.

[Bjauck]

Just thinking about the comparison to the most febrile property market in the world London. Significant chunks of prime residential real estate is and always has been leasehold. Doesn't seem to stop Barclays, HSBC from advancing mortgage finance to eager buyers.

DYOR but I think it depends on the terms of the lease and the differences between English and NZ law - frequecy of ground rent reviews, how they are calculated etc? I think some ground rents are at near peppercorn rates and other terms enable them to be treated a though the land were freehold.

I think St Johns and Cornwall Park ground rents in Auckland range from 5-7% of the land values fixed for about 7 to 21 years. So they are expensive, although less so towards the end of the period (depending on the intervening land price inflation.)

[JBmurc]

NZ DEBT BINGE

http://www.stuff.co.nz/business/opin...finance-crisis

[Bjauck]

It's not only first home buyers who are being pushed out of the market now. It seems that owner occupiers who are wanting to upgrade/move into a bigger property are being muscled out of the Auckland (& elsewhere?) market by investors.

John key recently said that Akl first home buyers should settle for buying an apartment (as he said they do in Sydney & Melbourne) and then upgrade later into bigger homes when they have a family etc. Well, it looks increasingly like investor demand is pricing that "plan" out of reach of many, so families will increasingly remain in flats and rental accommodation. Time for further action to address unaffordability for NZ residents and owner occupiers Mr Prime Minister?
http://www.nzherald.co.nz/business/n...ectid=11703301

[Aaron]

NZ DEBT BINGE

http://www.stuff.co.nz/business/opin...finance-crisis

I wonder why he doesn't think inflation will eventuate to help out the borrowers?

[JBmurc]

I can't see how we will get much inflation anytime soon outside the ongoing misallocation of cheap/foreign funds into the safe haven of property chasing the ongoing capital gain.... advances in technology for energy / food .... influx of cheap labour to western nations ..negative rates spreading ,,,,the whole monetary system is broken..

Thanks to corrupt Governments across the world have given the power to create money to the private corporations that we know as banks. Today, over 97% of all of the money used by people and businesses is created by banks when they make loans....as we know the most important Central Bank FED RESERVE is owned by the biggest international banks

And as we seen from the GFC even when the banks lose they win ....(thanks Gov's)

And as we see from the biggest markets ....they demand low rates now ...higher rates even just 1% would crash the DOW ,S&P and force the FED to turn tail .......

Its Broken ...needs reset .....a fix ....otherwise IMHO we go down the same road as JAPAN but on a Global scale and after a mother of all property Spikes -and nasty Crash end up in a Zombie nil growth high DEBT to GDP

And years from now see negative rates as quite normal .....along with very tough restrictions on lending...

basically Communism of the masses