If you can dream it, you can do it
Yes, it’s true. It is possible to buy your first home in this market. We have seen what planning, budgeting and hard work can produce. Sacrifice, yes there is that too. As Walt Disney said “if you can dream it, you can do it”. We have been so impressed by young clients of ours, who have recently purchased their first home. They were realistic about what they could buy. They weren’t expecting to have an ensuite and a fancy kitchen. They decided what was essential – a warm, dry house with some room for their 3 kids to run around. The rest, they could work on. They budgeted hard. They gathered a good team around them – a real estate agent, a lawyer, a builder and of course, an experienced financial adviser. This house purchase was an endurance event, after a year of searching and heartbreak.
It reminds me of the first time I purchased a home. It involved sacrifice and a few sleepless nights. I remember not being able to go out for dinner as much, buying cheaper wine and taking cheaper holidays. At times I wondered if it was worth it. Now with the benefit of hindsight, I can say it totally was.
Don’t let interest rates put you off. They are higher than they have been and are set to rise higher. However, over a 30-year mortgage, you’re likely to see at least 3 interest rate cycles (high, low, high, low, high, low). While interest rates are going up property prices are going down. As a result, you may find your overall affordability (what can buy), is achievable.
With hard work and guidance, anything is possible.
From Tony Alexander, Independent Economist:
Interest rate outlook less benign
Over the past month we have received further confirmation that the housing cycle is turning in New Zealand. But we have also in hand plenty of reasons for not expecting an upturn as such of any interesting magnitude will occur for some time.
For the second month in a row my survey of mortgage advisors has shown a net 47% seeing more first home buyers in the market. My regular survey of real estate agents also shows a net 27% are seeing more first time buyers. But neither survey is showing a return of investors as yet and that is relatively easy to understand when we consider the difficulties many are having getting finance, the impact of tax changes announced in March last year, along with rising interest rates.
The outlook for interest rates is less generous than it was four weeks ago as a result of the surprising easing of fiscal policy in the United Kingdom which has placed upward pressure on interest rates globally. In addition, inflation and employment numbers out of the United States have come in slightly higher than expectations.
In New Zealand our data remain largely positive especially when it comes to the state of the labour market. High job security is a strong supporting factor for the housing market. But in an environment where expectations are growing of a global recession next year, net migration flows are outward, and with an election year on the way, the real estate sector recovery over 2023 is likely to be relatively muted.
At least there is perhaps one positive thing to take out of the less generous interest rate outlook. The chances have increased that the Reserve Bank will ease up on loan to value ratio requirements at some stage in the next few months. But it does pay to keep in mind that we are operating in the least certain environment since maybe the 1980s because none of us around the world really know how our inflation rates will adjust to higher interest rates this time.
For additional information on the economy, housing market, and interest rates, you can subscribe to Tony’s free weekly Tony’s View publication at www.tonyalexander.nz
Disclaimer: This newsletter is meant to be informative and engaging, hopefully not a cure for insomnia. Please don’t take this as personalised financial advice. Discuss your situation with an Advisor. This is where I need to say past returns are no guarantee of future returns.