The first home buyer's market just got even better

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You probably saw it in the media, but in early May the Reserve Bank cut the official cash rate to its lowest level ever - 1.5%.

The big news for anyone planning to buy their first home, or existing homeowners, is the banks lowering mortgage rates as a result, in a bid to attract new customers and please existing ones.  The lowest we’ve seen are around 3.85-3.89% p.a. depending on the term.  It wasn’t long ago there were no rates below 4.0%!

It is not a surprise then that Westpac chief economist Dominick Stephens believes that lowering the OCR would encourage an upturn in the housing market.  If you have been eyeing the market and looking for the right time to buy, now is a good time to put thought into action.

Here are four reasons why the odds are in your favour.

1. Let’s do the math - buying versus renting

Over the last couple of years there’s been a lot of discussion about Generation Rent or those who are facing long term renting because of the unaffordability of housing - this latest Reserve Bank move, that has come about because of a slowing economy, has tipped the balance in the buyer’s favour.

Let’s say you are looking to buy a house for $400,000 with a 20% deposit, meaning you will need to borrow $320,000.  A 0.25% cut in a mortgage interest rate would mean saving $800 a year on interest, a large chunk for someone buying their first piece of real estate. 

This is an attractive incentive to get your calculator out and do some sums.  As we’ve discussed in other blogs, the first step to getting on the property ladder is having the right mindset. Do some research, make sure your finances are in shape and save so you are prepared to get a pre-approval to purchase - you can then go house-hunting with confidence.

And looking ahead, with interest rates low there’s an opportunity not only to get on the property ladder but also make a good start to paying off the principal of your mortgage when you do own a home.  Interest rates are bound to go up again but while they are low, take advantage.

2. With the recent construction boom, there’s plenty of houses to choose from

Christchurch is one of the few places that have a surplus of houses due to the construction boom since 2010.  Many homes sit empty and now with interest rates lower, these houses are more attainable.

With this excess stock you also have the chance to choose what kind of house you want, ranging from family 3-bedroom homes to space for just you and your partner in an apartment whether existing or off-plan

3. The price is finally right — as right as it has been in a while

The average price of a home in Christchurch is now $445,000 (interest.co.nz as of May 31st 2019), a considerable change to the $460,000 in March. This 3.3% difference in just three months reflects the mood of the market overall and some commentators say it’s expected to drop further.

While it may be easier to get a mortgage now, first-home buyers need to think about what they really need. Having an extra lounge room or an enclosed garage increases the property’s overall value. 

It can be tempting to buy a larger house while interest rates are lower because you can afford more, but beware that interest rates change.   For now, a $360,000 apartment might just be the house you need - be prudent and wait for bigger homes in years to come.

4. You’re not the only one purchasing a house

Though house-buying has never been an easy task, with lower interest rates and the cooling market, your goal is now more attainable.  Others are spotting the opportunity too and the numbers of first home buyers are increasing.

According to homes.co.nz 1,000 Canterbury houses in the first home buyer price range were sold in the year up to May 2019.  This means a lot of competition out there to get on the housing ladder.  This is a welcome change to recent years when first home buyers could only watch in disbelief as house prices accelerated upwards and out of reach.

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Buying your own house can be a dream come true, but it requires financial responsibility and doesn’t come without risk.   However, 2019 seems to be on the home-buyer’s side.  Start by doing your research and look for the house you need at a price you can afford.

There is nothing we enjoy more at Taurus Home Loans than to help first home buyers get a foot in the door of property ownership.  We understand it is a sure way to secure a financial future, as well as have a home to call your own.  We would love to help - if you would like a chat, some initial advice and a coffee, please just give us a call.

References:

https://www.stuff.co.nz/business/112558850/reserve-bank-cuts-official-cash-rate-to-all-time-low

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12228941

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12229026

https://www.oneroof.co.nz/news/36271?ref=nzhhome

https://www.stuff.co.nz/business/property/107971093/is-christchurch-the-only-new-zealand-city-with-too-many-houses

https://www.oneroof.co.nz/news/35945?ref=nzhhome

https://www.interest.co.nz/charts/real-estate/median-price-reinz

https://www.stuff.co.nz/business/112561126/market-conditions-right-for-firsthome-buyers-to-jump-in-commentators-say

Posted 24 Jul 2019