madao

Hi

Having relocated to Auckland a few months ago we are now seriously considering buying, anything, just to get on the property ladder. I know people have said for a long time prices cant go any higher but they just seem to keep rising.

As first time buyers we are already priced out of so many areas, even for a small unit. The fear is the longer we leave it the more unobtainable it will ever be to ever buy here.

The depths of South Auckland are looking more and more realistic for us given our current budget. Hopefully people are starting to buy in to these areas now, given the crazy prices closer to the city, and the they will improve as people renovate resulting in prices continuing to rise.

Question is do you think we would be buying at a peak of a bubble now and setting ourselves up for hardship and failure or do you think this kind of market can continue for a while at least yet?

Aware this is the million dollar unanswerable question but would be keen to hear peoples thoughts

davros1984

Hey - great post and welcome to the madness that is Auckland.
Out of interest, had you read any of my posts/threads on here prior to moving to Auckland?

I apologise now if some of my responses seem a tad harsh, they are intended to really get you to think about it and answer the questions truthfully.

In response to your questions:
a) Why did you move to Auckland? We love it here but are leaving in the very near future due to the madness you describe (even though we earn good salaries and can save in the region of $5000 a month). Buying a house here would mean we have to work work work for the next 30 years and try and keep our high salaries.

b) Really think about interest rates, if rates go up to 7%, can you really afford the repayments?
http://www.stuff.co.nz/business/mone...ts-likely-soon

c) Why put yourself through the stress of it here? Also live in an area that probably isn't what you want, why move all the way to the other side of the world for that? There are other cities and areas in NZ that are more affordable.

d) My view is that the market will crash, but not until after a big rate rise, so I'd say in 2 years (ish).

I totally get what you're saying about the longer you leave it. We felt that pressure and it really got to me. Now though I've stopped caring as I know Auckland is nothing more than a fantasy-land. A good job with little responsibilities in life and no worries. I don't really class that as living in the real world. If we did buy a house here, we'd be mortgaged to the hilt which means no travel home or abroad and all we'd do is work (as stated above). Again - that really isn't why we moved to NZ in the first place. We moved here for a more straight forward, simpler and less problematic way of life (for instance smaller population, loads of land, thus little competition for houses - oh how Auckland really isn't like that).

We went to buy a house back in May, but we were told that our deposit wasn't big enough (even though it was above 5%). 2 Banks - ASB and ANZ told us to come back in 6 months. Guess what, in 6 months the government had introduced the 20% rule!!!

madao

Interesting reply and very useful. Not read any of your threads but will search them out.

In answer to your questions...
a) Prior to AKL we have been living in Wellington for the past two years but we transferred here because of my work. Given the size of the respective airports Auckland has the best opportunities for my career.

We are late 20's / early 30's, no kids, no debts or credit cards etc. Given our position also able to save thousand or two each month. Probably more if we really wanted but we aren't shy with some of our lifestyle choices.

b) We are exploring mortgage options with our bank, ANZ, other lenders, Kiwibank and Westpac and a couple brokers. We looked at the welcome home scheme for a lower 10% deposit but have found there are a few clauses that may exclude us, the biggest being the 2 year indefinite travel restriction on a residency visa. Ours is up in June and this seems to be a requirement before being considered.

On a straight mortgage ANZ have said they may consider us under 20% deposit (with a interest loading) on the basis we have no existing outgoings / commitments. We have a meeting with them on Saturday.

AS to what would happen if rates rise i've not looked in to that yet as we need to establish what would be lent first. I'm hoping that any mortgage we take would be less that we are paying for rent now so we would have a buffer but I agree we certainly need to do some sums.

c) As detailed unfortunately my work makes this the best place to be in NZ. To get on the ladder I would certainly choose an area that may not be ideal to start with. Biggest factor will be ease of commuting so within a couple K's of a train station or close to a bus route to the CBD is a must as that's where my partner works.

If the market will continue at current pace for a while longer we would make more capital growth in the house prices than we would ever do saving a couple thousand a month or the 6% we are earning with our savings account. This could then give us the possibility of selling up and investing the return the next more suitable property

d) I would expect a crash, dip or plateau if interest rates rise. Given the governments encouragement of the foreigner with big cash to invest though I wonder if they will continue to outpace whatever struggling Kiwi's think or do to correct the market.

We certainly moved here for a better life too and aspire to the dream of a decent bit of land out of a city eventually but I feel we have to take steps now to achieve the kind of capital it would require.

Thanks for your reply, I'll feed back after the weekend when we find out what ANZ say!!!

davros1984

Hi - thanks for response and not reacting badly to me!

Here's 2 you really should read (please excuse my sarcasm in one of them..)
1) http://britishexpats.com/forum/showt...=810069&page=2 (page 2 onwards)
2) http://britishexpats.com/forum/showthread.php?t=806663

It sounds like the both of you are in a similar position to me and my partner. I'm 29, my partner is 30, no kids, no credit card debts etc. Only thing I have is my UK student loan. Our outgoings are quite low.


You may also find that you and your partner earn too much. This is why we didn't qualify for that scheme. I think you're right r.e. the residency, I am fairly certain you need full indefinite residency first.

As for ANZ.. good luck They were better than ASB though who flatly told me "most of our clients are millionaires". How much are they looking to bump up your interest rate?

Please be careful, I hope it won't be an issue for you. I know people who live on the breadline now with their current mortgages and the current interest rate.

Point taken r.e. what you can possibly gain. But if it all crashes, you're then stuck with a really huge mortgage (potentially). I think you should give Auckland more time before you do buy.

I am not sure what your field of work is, but from what I gather its airport related? If so, you are somewhat like me - restricted to working in major places (I work in IT). Whilst there is the odd rural job for someone like me, they are rare and usually non-challenging or low-paid roles. Ultimately, the choice of jobs is in the bigger places, i.e. Auckland.

I have come a conclusion though... and maybe you might in time (especially with the situation in Auckland), however I do get the fact that not everyone is the same and what is right or wrong for me may not be right for you. I am just trying to tell you how I feel after being here for over 2.5 years. I'm saying this as I think it might be useful or helpful.

Last year, up until about June, I was dead keen to buy a house here and settle. I was excited as I felt that we could both settle here, be happy and potentially spend at least the next 5 years of our lives in Auckland. We were looking at places that had a CV of 370-440K NZD, but they were going at auction for at least double that. After attending house auctions and seeing how crazy they are, both in terms of the volume of people and winning bids, it put me into a bad place. It took a long time to get out of that. In the end, I had to put my head down and think for a while. One of the key outcomes (as many first state when they come to NZ) - how on earth are these wooden, damp, rotten, tin-rooved houses worth so much? Anyway...

I am ambitious career wise, I am driven to do better and progress. I suspect you are similar. Ultimately though, there is a time-frame on all of this.
Simple question is: what would the point be in having a well-paid good job if:

a) you'd always have to rent (property prices are just too astronomical)
b) You'd have to carry on as you are, wanting to get on and buy and put it off for at least 3-4 years (meanwhile her body clock ticks on..) and then you still have a good 30+ years of working hard ahead, when do you ever get to live life?
c) Why save to climb a mountain if you're too old to ever do it?

Those are my thoughts, and to me the answer is staring me right in the face. Auckland is not the place to be. The person who said point C to me, changed my perspective on a lot of things. I also admit, some of the people on here who I disagreed with, did point out a lot of key things that I have given serious consideration (especially our fellow expat in Cambridge). Another key thing that someone said on here was... why on earth did you move to NZ for career development? There are some perks to being here, i.e. you are treated better and the pay might be better, but its a fair point... there are many more amazing career opportunities in Europe, USA and elsewhere than NZ.

Anyway, enough about me, I wanted to paint that picture so that you get the idea of the soul-searching I have been through in relation to your question and possible struggle.

No worries, I hope this reply hasn't peeved you off either. I know its long, but I think I feel and get where you're coming from.

Looking forward to your reply.

I'd add though, I have been looking at property back in the UK and I am just staggered what I can get in some parts of the UK near to cities and work (and its still at least semi-rural). 3-4 bed houses, a decent size back garden, all for less than 200K GBP. Hence, the stress/strain for me here is a no-brainer (although leaving my current job will be sad).

Pom_Chch

Hello

I understand your predicament as we are in a similar situation in Chch. However, there are ways around it down here, which is good.

If I was in your situation I would hold off in Auckland. Perhaps wait a year or two to see what happens to prices and see if the not-so-nice areas pick up. I agree with Davros when he talks about buying a small unit in a not-so-nice area going for way above what it's worth. I guess there's not much point in doing that other than if it's a second house for investment purposes. It's important to like the area and property you are buying otherwise I think it will ultimately cause and frustration and resentment.

I am not too worried about interest rates rising. It sucks and it's frustrating, but ultimately I would rather pay more interest on my own home than see my hard earned money paying off some greedy landlords property. And believe me landlords are greedy little bar-stewards in Chch at the moment. I guess the problem comes when interest rates rise so much that you can no longer afford re-payments. I am confident they will not rise that much.

Good luck with it all

Northern Henry

Interest rates will rise, budgeting for 7% would be wise.
Bubble? hinges on economy and demand: AKL is growing/ demand is high- mainly from international market and incoming high paid immigrants. IMHO Expect a dip/ slowing if rates rise. But like anywhere if people want and are willing to pay, prices will rise, whether that represents a good deal is all relative. You will always be able to find a cheaper place to live or a comparison that makes AKL look too expensive, but you need to take that attitude if you want to live in AKL. I could find you cheap housing around any city in the world, but it always boils down to location.

Speculate to accumulate...buy somewhere well within your budget, further out/ maybe a longer commute for a while. Do it up, sell it and move on (you are young enough). NZ has major advantages for this- no stamp duty, no CGT.

Like anywhere else in the world: Compromise and commit, potentially watch the market continue to climb and take little steps but allow a buffer- if it stagnates or "crashes" what's the worse that can happen- its only an issue if you wantt to sell... You will find nearly all the comments about a bubble come from those either not on, or wanting/ wishing they were on the central property bandwagon and delayed commitment tastes bad. (Same in most major cities in UK/ OZ/ NZ..etc)

A Rush And A Push

If you are thinking of having kids at some point in the next few years (personal question and not one you have to answer, obviously!) then I would think there are advantages in buying somewhere now, even if it's not exactly where or what you want long-term and whacking as much money as you can in overpaying the mortgage - especially while interest rates are still at a historical low for NZ.

It will be much harder to pay a mortgage/buy house in dream location when you are doing it on one income, or on two incomes but with childcare costs.

(This is obviously all dependant on NZ and Auckland being where you decide you are going to stay)

Will the market crash? I don't know. About 10 years ago a house in our street in Mt Eden sold for $375K and we all scoffed and said prices surely wouldn't go much higher. Same house would probably go for at least a miliion now. Obviously, that rate of price increase isn't sustainable but long-term, house prices do tend to rise.

We bought before the market went crazy in Auckland but even so, if I could go back 10 or so years, I would have bought a few years earlier than we did and ploughed money into overpaying the mortgage while we were on two full incomes. Ah well, at least the money went into some great nights out .

Tom1983

I feel sorry for you

I don't think I can give you any advice on what to do regarding a house buy in Auckland

I generally don't see the prices coming down at all and with interest rates increasing, you'll find it tough. All this nonsense about the stupidity LVR rulings has not bought prices down from what the herald and others have said. Infact, it's done the complete opposite

Be a bit careful with the banks. The few minority that offer the 10% are either because of the Welcome Home Loan (from the sounds of it, you'll be able to qualify from June), or what is called a construction/new build loan. Have you considered a house and land package or building your new home? You'll be guaranteed proper insulation and double glazing with a new build

pippalonghorn

Hi I think trying to find a property quickly runs the risk of you panic buying a house which you would not normally consider just to get a foot on the ladder. I certainly would not be looking to buy at this time if I were staying (and could afford to).

It is madness to pay top price for a house. Yes the house prices may continue to rise but there is a risk of the bubble bursting at some point. There is only so much air you can push into a balloon before it bursts. You would then be stuck with a huge mortgage on a house you really didnt love and be in negative equity. I would hold off for a while. If you are set on living in Auckland or the outskirts then I would rent for a while. I know renting is not ideal but in todays market it is very wise.

simonmarkellis

Why doesn't the Govt set interest rates higher for non residential overseas property investors? If you don't live here, paying a higher rate may help your average Aucklanders....

pippalonghorn

I don't honestly think John Key gives a naff about ordinary Aucklanders. He welcomes overseas investment because that's where the most money is.

davros1984

This is why WP gets my vote He appears to be the only one who does care about ordinary NZ'ers.

bourbon-biscuit

I get so hacked off with the lack of real investigative journalism in this country - our PM is a business man who has made a lot of money in 'the property game', and under his watch the property market in NZ has exploded beyond the means of most NZers ... anyone else smell a rat?

davros1984

Spot on. Still, there appears to be a high level of ignorance or a lack of caring in this country. This article thinks government corruption is tiny. I have never seen a "western" country with such a corrupt lot, they are completely destroying NZ for 'Kiwi's'.

Stormer999

Corrupt politicians in NZ well I always thought they were as honest and forthright as the leaders of all the other countries in the World
They will be claiming expenses next to have islands built in their ponds next for the ducks to nest on........