Are you eyeing up a new home this year? It might be your first home, or you might be taking the opportunity to upgrade and step into a better suburb. Whatever your motivation, here’s what’s on the cards for 2018. Let’s start with first home buyers.
The good news for first home buyers at the back end of 2017 was the Reserve Bank loosening its loan-to-value limit from 10% to 15% of new business being able to have a deposit of less than 20%.
In 2017 we struggled to get approvals above 80% with only the strongest applicants getting approved. The new 15% limit will increase the number of borrowers we can get approved by 50%.
Remember also that new builds are exempt from the Reserve Bank rules. And if you buy below $650,000 in Auckland you could be eligible to get up to $5,000 per borrower under the HomeStart Grant (or if you’re buying off plan or building new you could double your HomeStart Grant to up to $10,000 per borrower).
As a first home buyer, you’ll need a 10% deposit to access your Kiwisaver (including your Kiwisaver funds.)
The main hurdle is how much you can borrow. As a rule of thumb, work on five times your gross annual income. Bank servicing calculations are tough. You should have a chat to Alan, our new first home buyer chat bot and see what he says!
The other good news is the increase in listings and slightly softer house prices. There’s an increased opportunity to secure a home for a fairer price. It all depends on where you are buying.
Entry level prices in popular suburbs will largely hold up, whereas they may fall further in less desirable areas. Even in popular areas, some properties with CCC issues, or just plain f-ing ugly might be opportunities. As much as there is plenty of talk about falling prices, it’s not across the board, so it pays to get familiar with the market you’re looking to buy in and do your research. Our advisers are a great source for on-the-ground feedback on what they are seeing.
There will also be opportunities in green field developments as developers and builders come under more pressure to clear stock. That could also be an up-grade opportunity for those wanting to step up into a new property.
You should download a copy of our First Home Buyer’s Guide as a great resource for helping you through the ins and outs of buying property.
If you purchased your first home several years ago then you’ll be sitting on some strong equity growth.
First things first. I generally wouldn’t keep an owner-occupied property as a rental. What yield are you getting versus the value of the property? In Auckland, most yields on this type of property are below 4.50% before costs. You’re better off selling.
If you’re looking to buy, then I’d recommend selling first with a long settlement date. That can feel daunting, but doing so sets you up in the best possible position. And if you don’t get the best price, remember you’ll get the same sort of price reduction when you buy.
Buying and selling in the same market should be at least neutral, but if you do well it’s an opportunity to create equity and jump ahead. The house you’re selling will likely be prime for the first home buyer market whereas you’ll be stepping up into a less competitive part of the market.
Do your best to market your property to homeowners. Declutter, consider staging, tidy up the garden and look at minor deferred maintenance. It can make a big difference in a soft market.
I’m also a BIG fan of listing with the best agent. It staggers me how many people list with agents they know, a friend of a friend, or someone at the local golf club. This is terrible criteria for judging who will get you the best price. This is your nest egg, so aim for someone great. Also, remember a great sales person isn’t the person that tells you the highest price during listing!
Look at their marketing, how they present themselves, their language, their professionalism, their timeliness and attention to detail. Do they genuinely listen to you? Do they ask lots of questions before jumping to solutions? How many properties are they currently selling? How many did they sell in the past 12 months?
Feel free to run agent names past us or get a recommendation. We do over $1 billion of property transactions each year so get to see lots of agents and what they are doing.
My final thought is that if you’re looking to upgrade, now is a great time to be looking at green field developments and new builds. The slowdown in the market has made some builders and developers more negotiable.
If you are about to buy your new home, our Homeowner’s Loan is a great option when it comes to custom-designed loans. Read about how it works and why you should choose this loan.