Entering the property market for the first time?

What you need to know NOW

There are many ‘first times’ greatly impacted by COVID-19 - children starting school, young people heading for their first OE (we feel for you!), having your first baby during lockdown, and for our purposes, buying your first home… 

Much of the best advice and suggestions on how to navigate these rites of passage and what you can expect has been put in isolation (excuse the pun), as collectively we figure out this new normal. 

The bad news: yes there is uncertainty. Understatement of the year. We don’t really know when the virus will peak globally and how it will continue to affect things here or around the world. 

The good news: there are some key factors to give real hope to home owners and first home buyers in this time.  

People still need houses. People still need or want to sell their house/s. People still need to work, produce, continue to move forward as best as we can, and there are always going to be winners that come out of times like these. 

We hope you are in a position to take advantage of these factors, and will give you plenty of tips to maximise your position as you do. That’s what we're here for!

The key factors to give first home buyers hope:

1. Falling house prices (at the lower end)
2. Higher yields for rentals
3. More flexibility in purchasing

1. Falling house prices

Falling house prices at the lower (read: first home buyer’s) end of the market and rapidly reducing mortgage interest rates came together as we emerged from lockdown, giving way to more affordability and greater ease for potential first home buyers to enter the market. 

“According to the Real Estate Institute of New Zealand, the national lower quartile house price hit a record high of $480,000 in March and then declined to $458,000 in April and 445,000 in May. This means the lower quartile price has declined 7.3% from its March peak. The lower quartile price is the price point at which 25% of sales are below and 75% are above, representing the bottom end of the market that is usually of most interest to first home buyers on average incomes.Interest.co.nz

To show you how this might stack up numbers wise in Auckland:

Or, if you want to take on a bit more risk with a 10% deposit:

Unfortunately there are downsides to a lower deposit, because it increases the size of the mortgage the borrower will need and they will also likely pay a significantly higher interest rate for it.

For the best solution for your circumstances get in touch and we can create a plan that works for you.

2. Higher yields for rentals

According to the latest data from Barfoot & Thompson there has been a 3.27% increase in gross rental yield putting them ahead of most mortgage rates. They looked at the average price of three bedroom homes sold by the company over the last six months.

Why is this good news for first home buyers? 

The thing here is reducing risk. If you can buy an asset that gives you a roof over your head, but also has the potential to give someone else a roof too - even if for a short term fix - this gives you that bit extra power and confidence in purchasing. 

If you are a couple buying a two-bedroom unit for example, it may give you confidence to know you could always rent out that extra room in uncertain times. It could also be the perfect time to talk to your friend about buying together and renting out the other rooms to flatmates. 

While these ideas might not improve what you can borrow or how the bank feels about you (they are always going to look at your income and the acceptability of the home you are purchasing beyond anything else), it can give you the peace of mind that if in six months time you lost your job, you would have some options in a strong rental market to alleviate the pressure while keeping your home. It also helps make the case for buying rather than continuing to rent, as you may very well be better off (ie. have lower payments) with a mortgage than a rental.

While these are hypothetical examples, we cannot stress enough how important it is to get good advice from the experts (my hand is up here) on your journey. Skilled and experienced lawyers, real estate agents, mortgage brokers, financial advisors and others in the field all have wisdom and advice worth weighing up as you go about your search. Use your village and if you don’t have one, get one. Start here.

3. More flexibility in purchasing

Anecdotally I’ve heard from agents that throughout the period of coming out of lockdown they were able to give more attention to buyers, getting to know them more and gaining more understanding of what they are after. When house viewings were limited by social distancing it meant fewer buyers were at open homes, and agents could spend more the time. Then and now you are more likely to find only serious buyers at open homes - and this is generally true for the winter months anyway - and so you are likely to be treated better simply because agents have that time. Take advantage of this!

Significantly adding to this scenario, for the first time in a long time vendors and agents alike are receptive to conditional offers. So if you do have a home to sell, there is more flexibility there. And if you don’t, your cash offer can come in strong even if there are offers on the table, as they might just be held up by a house to sell.

Next month I've got a whole bunch of insider tips for dealing with real estate agents so stay tuned. And in the meantime, do get in touch to arrange your pre-approval perfectly matched to your circumstances and goals.


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