As part of my ongoing efforts to keep your glass half-full we take a look at FIVE things to keep you smiling this Winter.
- New Zealand’s economy continues to kick along remarkably well given all of the doom and gloom peddlers out there. Our exporters are doing pretty well (dairy very well), the NZ dollar has dropped a bit, we’ve still got strong employment (albeit there are some job losses), and May net migration at 1,010 is the best we’ve seen since Dec 2006. (Incidentally Australia is having its highest net immigration in 20 years!)
- Over the past 5 years first homebuyers were less than 10% of the house buying market. This will, and is changing. Using our average first homebuyer (combined income of $90k, $330k mortgage) 48.7% of their income goes towards paying the mortgage. By November this will have dropped to around 43% and then 39% by March next year. That’s a cash flow improvement of $128 per week. The two main drivers are: (1) tax cuts coming up in October ($22 per week per tax payer) and (2) the Reserve Bank lowering interest rates 0.50% this year and 0.50% early next year.
- So we think there will be a small bounce-back in house sales this Spring (from immigration and First Home buyers.) Not a lot … but enough to take us off the cyclical lows we are currently seeing. That said, I wouldn’t expect house prices to go up anytime soon as they were simply too high.
- Lots of property to choose from. Two years ago it was hard to find a house, and when you did chances are you had to compete for it. Invariably buyers compromised a lot! What we’re seeing at the moment is that clients are finding the “right” house and generally getting it for a good price. Clients, on average, are buying at about 10% below the vendors asking price. At the more extreme end, the odd client has managed to get 20%+ off the asking price.
- Get pre approved and go to a Mortgagee Auction. One of our clients recently picked up an inner city 110 sqm freehold apartment with 2 car parks for $300,000. I’m sure he’s smiling a lot! (A minimum deposit of 10% is required for apartments.)
Final JB thought – 80/20. I was looking at property with a client the other day and noticed that I really liked only about 20% of the stock. (I’m a fan of 1950s-1970 architecture – either brick or weatherboard with good bones and big windows.) When things do pick up its this 20% of properties that gets competed out of reach. Wait “two years” for prices to fall and these simply will not be there. I’d suggest now, or this coming Spring, will be the best buying if you are after a quality home.
