NZ 1st homebuyers are ScReWeD...

[Jay]

Can't see fixed rates being that low in the next few months - maybe by end of March.
They would need to fall by a nother 1% or so.
Talk around the traps is that any reduction in the OCR won't necessarily be fully matched by a drop in fixed rates due to cost of funds for the Banks.

[POSSUM THE CAT]

As Govt guaranteed finance companies are now offering 9.9% debentures are the banks going to have to increase their deposit rates or have a huge cash outflow. So no money to provide mortgages

[minimoke]

SC has quite the criteria for buying his first home. He wants:
- low interest rates (now down to around 7.9% from 10.5% - but he is still looking for lower rates)
- buying at the bottom of the market
- Paying the loan off in less than 15 years
- paying less than $500 a week in repayments

- coming in with a sizeable deposit (he’s got $20,000 at the moment).

This is a bit like waiting for the stars to align. On these numbers he could buy a $250,000 home.

Except – he now needs a 20% deposit with Kiwibank so his $20k isn’t enough – he’s $30k shy. His income is probably a bit shy as well. With a back end ratio of 36% he’ll need to be grossing $72,000 for this loan. Lets look to the banks tightening this ratio even more. Unemployment on the increase, more redundancies, employers not hiring – is $72,000 likely?

Obviously the stars aren’t aligning so some of his criteria have to give. A greater deposit means less repayments so that might work. Oops he’s delayed buying and had $40,000 but its down to $20k. He could wait for the banks deposit ratio to change. Opps it has from 110% mortgage down to 80% mortgages. Interest rates could come down – well they have dropped over 30% already so a bit more could do the trick – except he’s not into Fixed Interest rates which would get him a loan at Kiwibank at 7.29%. Or he can wait for property values to drop – hm $250k will get him http://www.trademe.co.nz/Trade-Me-Pr...-188525667.htm but not much room for flatmates (to boost his income) or $220k could be an option for this one http://www.trademe.co.nz/Trade-Me-Pr...-171760247.htm. Could he look at a 30 year loan – but perhaps now isn’t the time to explore how far forward Gen Y’ers look.

So could it be that SC’s opportunity to buy his first home is less likely now than in the peak of the market back in ’07? Is there any sign that the stars are aligning or were they the closest they were going to get 2 years ago? Perhaps Macdunks advice that anytime is a good time to buy might not be so bad after all – provided you have flexibility in your criteria and you buy carefully.

[peat]

yeh I think McDunks argument is that in property and especially land (not undeveloped land, but property that contains a good chunk of dirt as such) that IF you never sell you will always be worth more if your time frame is long enough.
I mean how many conversations have you had with people that go along the line of ' I bought that place for X (where X = ridiculously low number) and sold it Y years later for Z where Z = 3 or 4 or even 5 or 6 times X. And now its worth 20 x Z.

If you never get into a position of having to sell property always wins. So if you can apply money management principles well enough eg not too much leverage and your base your purchase on your ability to produce income to service the debt (and you dont have any huge setbacks with this ) then its pretty much an absolute certainty that over the long run you win.

As has been pointed out the stock market is not quite like this in that there are complete belly-ups

[corran]

I mean how many conversations have you had with people that go along the line of ' I bought that place for X (where X = ridiculously low number) and sold it Y years later for Z where Z = 3 or 4 or even 5 or 6 times X. And now its worth 20 x Z.

...

As has been pointed out the stock market is not quite like this in that there are complete belly-ups

What I think a lot of people fail to grasp is that, over the last 8 years or so, the rise in house prices has turned into the biggest global financial bubble in history.

Many people have done well out of property but to look at the recent past and extrapolate that into the future is naive in my opinion.

What we're now seeing in countries the world over is the bursting of that bubble. 2009 is shaping up to be a year of global economic hardship.

For sure I'm staying on the sidelines for the time being, saving my pennies and watching the carnage.

I've got a sizeable deposit saved up but I expect house prices (at least in Europe where I'm living) to drop by 15% next year. A property buff may still be able to find a bargin but I'm not a property buff... I just want a nice home to raise my kids in and to protect our wealth.

And in my opinion, the best way to do that at the moment is to keep renting and step into the market in 2010 or 2011.

It will be interesting to see how things pan out over the next year or two...

[Dr_Who]

Dont wait too long, you are gonna miss out on some cheap assets.

[Crypto Crude]

hey minimoke...
boy... I dont really know where to begin...
I dont want to bore all you cats to tears...

trust me buddy, last year the outlook was so bad, that all these signals (interest rates et all) would have to fall into my court, and then some, just to halt a crashing market...
The truth is, housing has fallen so much that I could buy a house for 150k when this is over...
also, im expecting my shares to perform... and I will get a job, and add money... ive got no problems mini...
all will happen, it will only happen on my terms... I will call the shots and make that entry when ever I see fit, so as to get myself the best deal, and I still have a good Solid year (realistically 2 years plus), but time to readdress the situation next year...
goal---> houses...
but yah never know... If I get the right business opportunity, then I might scrap housing all together...
luck to yah

.^sc

[Crypto Crude]

yeh I think McDunks argument is that in property and especially land (not undeveloped land, but property that contains a good chunk of dirt as such) that IF you never sell you will always be worth more if your time frame is long enough.

exactly...
long term its a no brainer...
its the difference of getting positioned at say 21cents... or 14.5c for example...
if its going to 40cents, then you will make money either way...
its just the leverage that can bankrupt you in housing when times are bad for the newbie...
Id say the long termer will be relatively unscathed by all of this...
they will box on...
would a newbie?
Id say a newbie would not last a few rounds in a market like this, expecially if they were getting positioned at the peak...

.^sc

[minimoke]

The truth is, housing has fallen so much that I could buy a house for 150k when this is over...

I hope so cos this is what $150k will buy you today, assuming you can find another $10k as a deposit:
http://www.trademe.co.nz/Trade-Me-Property/Residential-Property/Houses-for-sale/auction-182564592.htm. A one bedroom 40sqm floor area unit in North Brighton.

Remember back in May there was a wee three bedroom, 683square section, close to golf, parks and schools. Sky installed, plenty off street parking, 10-15 minutes to CBD, quiet street for $189K. You could have probably have bought that property back then with your $40k (or even 20k) deposit. A couple of flatmates at $90 a room and you’d be looking sweet now.

Well another place has come up for this money. This time “the property has good bones (summerhill stone with aluminium joinery) and enjoys an excellent outdoor area at both front and rear. From the north facing deck step into the enormous sunny lounge, flowing through to the spacious kitchen/dining area with separate laundry attached, and then down the hall to the 3 double bedrooms (all with wardrobes) and bathroom with separate shower and bath, and separate toilet. The entire property is tidy and well maintained but modernisation would certainly give it a lift.

Rented fixed term to tidy tenants for $270pw, and with median rental in the area at $285pw, this property has plenty of room for improvement in order to increase the yield and value” Check it out at http://www.trademe.co.nz/Trade-Me-Pr...-189778098.htm

So what has changed in the market – Your $189k buys you roughly comparable properties (each with a few different pros and cons – but you get the idea) but your deposit doesn’t get you a look in now. If you had bought in May your flatmates would now be paying off your mortgage now. If you were worried about loosing on the property value any loss (which by the looks of it would have been minimal, if any at all) would be offset by the flatmates contributions against lower interest rates.

[Dr_Who]

Interesting article

Housing heads for a soft landing

http://business.smh.com.au/business/...f0.html?page=1