10 Reasons Why You Should Buy A Home This Year In NZ
Why you should buy a home this year in New Zealand, even if you never considered or you’re happy to continue to rent for the rest of your life. It’s good to just really get a different perspective on what it means when buying your first home.
It’s the year 2021 and with COVID-19 impact last year, it really shook the world into an economic downturn. If you’re living in NZ like me, we were however fortunate enough to not experience so of the widespread chaos that the world is going through.
In this blog, I am going to talk about why you should consider buying a home this year and in the following article, I will share some of the reasons why not to buy the property and look at considering renting.
Owning a home in New Zealand is just the kiwi dream, and also a fulling experience because it’s just part of the culture that we live in, our parents owned homes and so we feel like it jus the right passage to own our home and raise our children in it. However, in the last 30 - 40 years, we’ve seen house prices surge in fact every 10 years it’s nearly double in price!
But owning a home shouldn’t just be for the rich, everyone should have the opportunity to own a home, but it also comes down to you. Why? Because owning a home has a lot more to it than just getting a mortgage and paying the repayments, there are maintenance cost, upkeep, and the rise in insurance.
The good thing is that there are now many options out that you can consider your first home, these being
- Apartments
- Townhouses
- Stand alone properties (brick and tile)
- Life style sections
10 reasons Why you should buy a home this year
So, before I start giving you the 10 reasons, you’ll need to first understand can you actually afford to do so, which is the first step of purchasing a property, getting your finances in place. You can read all about how to obtain pre approval and how much deposit you really need to purchase a first home.
Better use of your money
With the current environment of interest rates, 1 year as of Feb 2021 is 2.29%! Which is bonkers, then you compare your own savings rate or even the term deposit rate set out by the banks. There isn’t much return, so people are looking for a better investment or a return on their money. Which may mean looking at property.
Another option is to look at the share market, but not everyone has the risk appetite to see massive upswings and downswings of the NZX50 or the other shares across the world.
Tired of renting
The most common reason you will read across why you should buy a home because as you know you don’t have to ask the landlord to make changes to the property such as putting a lick of paint on the walls or ripping out a wall to make the space bigger. You are your own boss and you can decide what you can do to the property.
Also, with rents going through the roof, most of the time your rent will be the same as mortgage repayment, if not more! You’ll just be paying someone else’s asset why it also appreciates in value.
Privacy & security
No more pesky landlord inspections or property managers inspecting the property every quarter and being home to tidy so someone can tell you how to live or not!
Secondly, you don’t need to worry about whether the landlord decides to sell up the property and now that you’ve finally settled in or you’ve been there for 10 years. You got to know the community, friends live around, school is close, then suddenly everything changes because the wants to move back into the property.
Ready to settle down
Being single makes sense to rent and be with flat mates because you enjoy the people around you and also love to meet new people.
Once you’ve decided to settle down with a partner and now a bit financially stable, looking at purchasing property is a great choice.
Secondly, having 2 incomes than 1 will dramatically help with repaying down the mortgage plus less stress with making sure you’ve got enough to service it.
Capital gains
Capital gains is a great bonus to owning a home, that is what really drives the wealth in NZ, as I said at the start of this blog, property prices have been doubling every 10 years and it seems like it may continue with the current trend.
As of Feb 2021, there is no capital gains tax and with Aunty Jacinda (Prime mister of NZ) if you are not from NZ, she has indicated at her last election that she doesn’t plan to implement a capital gains tax, as she and her party have tried for the last 9 years. But who knows what the future will entail. Hence why I said capital gains is just a bonus!
Future Wealth Generation
As time goes on, you’ll be repaying your home loan and the size of the loan will be decreasing. Meaning more equity in your home think of it like a deposit building back up. With the increase in equity, you could use it to build wealth and buy an investment property, downsize or get a bigger home for a larger family.
The baby boomer generation has taken advantage of their homes to build up their wealth through property, helping them through retirement. If you want to learn more about investing in property, send me an email and let’s see what we can do together.
Leverage
Owning a property is great and once you own the home and reduced the mortgage down. You may want to look at leveraging off it to purchase an investment property to continue to build up wealth. It is a great way to diversity, assuming that you’ve put some into other asset classes such as shares, commodities and maybe a bit of cryptocurrency.
The cost can be controlled
This is a unique one, even though you have no control over the external factors such as interest rates nor the cost of goods, but you can control what the terms and interest rate you can lock in for. From there you can determine what sort of budget you need for the year or even the following years. With renting you don’t have that control.
The landlord can increase the rent every year and if your wages aren’t interesting it’s just an additional burden and extra stress for you and the family.
You’ve also reduced most of your short term debt and just want to focus on killing your mortgage as fast as you can!
In the market
I’ve seen many customers who hold onto their cash and love seeing their savings grow, but with the rates now it’s going at such a small amount, they miss out on the compounding effect in other asset classes. But it ultimately comes down to what you feel comfortable with your money.
Many customers who want to time the market will continue to miss out on the opportunity, let me give you another example, buying shares in air NZ. When the market dropped to a low of $0.85c, getting scared that it may go lower, but they miss out, it then rides back up to $1.20 and then that person feels like it could go lower as it was the bottom before. But then it continues to go up. So you miss out.
Another is looking at crypto current such as bitcoin, people thought that we may see a bottom of $30,000 then it jumps to $40,000 now it’s at $50,000. The saying people buy low and sell high. Sadly, the emotions get the better of us and we instead do the opposite because we buy high and sell low, something called FOMO.
Buying your home is completely different you shouldn’t be looking at it from an investment point of view rather look at it home. Because homes that you live in isn’t an investment.
If however, you were looking to buy it as an investment then the numbers need to make sense before purchasing a property.
Something new and learning about the process
Even if you don’t buy the property in the end, it’s a great way to learn something new and what the process is when purchasing a home. You then have a bit more of a mindset of what to expect when buying a property in NZ.
Summary - why you should a home this year
Why you should buy a home this year really depends on your own situation, all the signs have to line up and first of all, you need to understand that you can actually afford this loan.
At the end of the day, it is a huge commitment, taking on a 20 or 30 year mortgage term, so you’ve got to mentally prepared and understand what the consequences are buying a home in NZ.
Lastly, I’d recommend you speak a mortgage adviser or broker to see what they can do to help you and if you can get a pre-approval and how much you can get approved.
That why it will help narrow down what type of properties that you can buy and set out a realistic expectation on your kiwi home dreams!
If you’ve got any questions, feel free to drop a comment below. If you want to chat privately you can either book a time with me below or send me an email will@simplyfinance.co.nz