11 Jan Auckland House Prices and your Mortgage
Source One News : January 10, 2013
Shared by the Property Law Team at Quay Law NZ – Your Mortgage Refinancing Specialists.
Auckland house prices might have gone up by 9% last year but that doesn’t mean first home buyers should feel like they’re going to be tenants forever. There’s still plenty of scope for you to buy in the big city.
The headline grabbing price increases last year actually happened in central Auckland and the city fringe where your typical first home buyer isn’t really looking. Well, not for a standalone house anyway.
Having said that you will get (have got) a ripple effect where prices further out increase as people turn their attention to other compass points out of the central city so it’s fair to say that first home buyers in Auckland will be paying more this year irrespective of where they look.
That certainly makes buying property a bit harder but how much harder, exactly?
I saw a great couple on January 7th who want to buy their first home. They’re pretty typical of the people I see – married, renting in west Auckland, both working, two toddlers, one cat, the usual expenses including a student loan, credit card and childcare.
They’re hoping to buy in the low $400,000s and have the required 5% deposit most of which comes from Kiwisaver.
If they fail to buy a place this year for $400,000 and prices rise by 9% again they’ll need to shell out $436,000 a year later for the same thing. Sounds rough but if you look more closely it is manageable.
In terms of loan repayments (and I’m going to assume interest rates are the same in Jan 2014 as they are now; not an unreasonable assumption) the additional burden amounts to $50 a week or thereabouts.
Despite that this couple is still within ASB’s affordability criteria.
In deposit terms the 5% minimum required by the bank amounts to $21,800 on a $436,000 purchase price versus $20,000 on a $400,000 purchase price.
Frankly, if you can afford to make higher loan repayments you can also save the extra bit of deposit required. My prospective clients have a bit more than this anyway so no worries there.
While I acknowledge a price increase ups the ante in terms of deposit and loan payments, for a lot of people that won’t be a deal breaker – especially when the possibility of some capital gain is on the table.
Clearly 12 months ago was a better time to buy a house in Auckland because it would have been cheaper then.
But don’t let that stop you now.
Talk to your mortgage broker, do your sums and if the dots connect then get moving.