simonsi

Compared to what please?

I know you quoted the article but please explain what the over-valuation is relative to, otherwise it is meaningless propagation of a statistic the article writer may not have understood.

Synky

If the market is high you buy high but you also sell high. If the market is ls you sell low but you also buy low. The problem only comes if you are doing one without the other I.e. buying high or selling low. Before deciding to continue to rent you have to think if you would rather be paying someone else's mortgage rather than your own. It might be expensive but at least you are buying something (equity) rather than nothing. Depends on your rates of course and your own situation.

sr71

Totally incomparable, not saying Auckland prices are not too high, but what happened in the States was completely different.

RedDragon2008

Far too many times these quotes of high prices are from people with no deposit, no savings and no income sufficent to be buying.

Yes house prices are inflated based on past 10 years of excessive living by the entire western world.

BUT:

Does everybody have to sell and endure a large capital loss?
Will the over valuation settle down over a few more years even 5 or 7 its a mild hump in scheme of a 30 year mortgage.
Are rental prices still lower?
Why would someone worry about a 60% drop in a $5 million home when they made 900% on a $90 million deal?

davros1984

I wouldn't say a household income of 140K NZD is insufficient.

RedDragon2008

I would

Synky

We can only dream of a household income of 140k NZ. We are on more like half that. Does that mean we are stuffed?

Snap Shot

No, you will just have to live accordingly.

(I hope this thread does not degenerate into a row about money). Who but the Prime Minister of NZ, John Key earns that sort of money ? I mean NZ$140,000. There's only about 5% of New Zealanders that earn a three figure salary. I doubt anyone earning NZ$100,000 or more could be bothered with this site.

davros1984

In terms of buying a house - yes I agree with you, its insufficient in Auckland as a first time buyer. However the vast majority of people in NZ and Auckland will probably earn that or less.

It depends, if you have a good amount of capital already for a deposit, then no.

The majority of people I work with in IT are earning in excess of $120,000. As for me, no - I do not earn over 100K, but between myself and my partner we are able to bring in, in excess of 100K. Even with that amount, Auckland has become crazy and to be honest we need to be on a household income of at least 200K to be able to buy and afford our first home on the Shore or somewhere south of the CBD.

Here is a mortgage calculator for a 3-bed house that is actually up for sale based on us having a 5% deposit for first time buyers. Look at the repayment amount over 30 years - totally bonkers.

House Price: $725,000
Deposit: $38,450
Loan Term: 30 Years
Interest: 5.60% pa
Min Monthly Repayment: $3,941.

Not impossible, just ridiculous.

BEVS

No.

It is all according to what you are used to, what you currently have and what your expectations are.

Last year our joint income was just about $46K what with one unexpected thing and another, as is life and what it throws at you when you don't expect it but we managed. Mind you , there was no mortgage. Not that we came here with no mortgage and all that. I had to lose a parent for that.

$140K? Stuff of our dreams


I will echo Snapshot. I do hope it can be kept real.

RedDragon2008

Wise words Snap Shot

And sorry to you Davros for my prior post it was bit snarky due to the heat I am also in IT but don't work by the hour, day or week.
But in defence you need to see my wifes spending habits

Now looking for a home is achievable but the truth with estate investment is think with your mind and wallet not your heart.

If you cant afford a suburb move or buy elsewhere and rent where you wish to live. You can always find a rental in a place you wish to live.
You told hold a big sign up on the way to work saying I confess I only rent here

I had a close friend who made the decision 5 years ago:
Could either buy a really crap house in nice suburb ie Howick for $600k or 4 crap homes in less desirable location ie Manurewa.
- He bought the homes in Manurewa
- Lived in his parents house
- Spent all available hours doing the places up
- Put in good tenants so the homes were positively geared (versus the normal negative geared here in Oz)
- Now he has a mortgage he can pay off inside 5 years (his income has gone up since then).
- He has a girlfriend - but thats another story.

Relevance? Well he is spending the next 6 months working 2 extra part time jobs to save for the deposit (he claims it must be separate from his last project).
Part time jobs:
- Cleaning the toilets at the local mall
- Packing aisles in foodtown or countdown
His philosophy is working keeps him from spending. So why he earns he also saves.


If this guy can do it anyone can do it.

RedDragon2008

I would probably not be looking at $725k but looking at 40% of your net disposable income and saying this is my budget now based on 10% of a property value what can I afford.

So say your earning 140,000 thats about $8.5k per month so budget of $3,429 or $41k per year at 10% gives you a budget of $411k to work with.

Now you could either start with a 100% mortage or save for a year on the basis that everything over your 5.6% of the $411k gets banked towards deposit, and your rental remains less or equal to the 5.6%??

Over the year your income should go up
You have a testing year of being able to live with potentially that value of mortgage over your head.
Over the year the dreamy vendors with aspirations beyound that of the market will be more sensible in negotiation (thats not saying drastic discounts) ie 5% to 15% and dont take that as uplifting your deposit of 5% to 20% but more bringing more house for your $411k

Anyway for what its worth thats how I would approach it.

davros1984

RedDragon - thanks for both of your replies, they have been very insightful.

In fact, the simple truth is that we will most probably have to leave the heart of Auckland and move to somewhere south of Auckland like your friend did. There property is considerably cheaper but I don't know much about the area. I know there are some places I should avoid! Alternatively, we will just leave Auckland altogether (in the longer term).

The only reason I say $725K is because the average 3-bed house on the shore sells for 600-800K. That is one of the few properties "in the area" thats under 800K.

I know we can save up a deposit in a year, not disputing that, its just the size of the mortgage payments over 30 years. We may have a good income at present, but once kids etc come along and its one income it needs to be manageable. Thats a lot of pressure to keep up for 30 years as well, certainly not looking to get into that trap. Need to be able to pay off a mortage in 20 years or less.

Would we really get a 100% mortgage?? I'd go for that if there was an option. But still, 95% is pretty generous and achievable.

Lets see what 2013 brings.

Cheers.

Synky

Guess we won't be moving to Auckland then! Thanks for your replies.

davros1984

Where do you plan on moving instead?