In our housing special this week, we address the most commonly asked questions by first-home buyers. Indian Weekender spoke to experts from the field to get their take on the issues that seem to be the cause of worry for most homebuyers.

Auckland’s housing crisis

Earlier this week, Auckland hit another price high with recent figures showing that the median price for a home in the city is now $842,500—a rise of 14% for the year. With rising prices seen not only in Auckland but around the country, mortgage brokers share their view on the city’s housing bubble.

Rakesh Bansal, Kiwi Mortgage

“Any price movement is caused by price mechanism in a free economy and cannot be wished away. The RBNZ/Banks have taken some measures to some limited success but more stringent and more direct measures will be required to:

•    Incentivise 1st home buyers, e.g. 5% deposit etc. and

•    Discourage speculation, e.g. more direct targeted taxes etc. and

•    Free up land and

•    Encourage construction for owner occupation and investment”

Prateek Malhotra, Everest Home Loans

“The current house prices have seen the median Auckland house price touch the magical $1mn mark. This is mainly attributed to the high net migration and a stable economy compared to the rest of the world. New Zealand, in particular, Auckland, is seen as a world class western economy with a stable political, social, and economic system and this attracts people from all over the world. This has put pressure on the current housing stock and as a result, prices are where they are. Although the government is trying to release more land and get builders to build more, we are still far off from getting close to the number of houses required every year to meet the current demand. The recent RBNZ restrictions put on investors has had an impact on the number of sales, not so much on prices so far.

There is another round of possible restrictions being talked about—the debt to income ratios. RBNZ is looking into it, although it might not happen on this side of Christmas. Having said that, if they were to be introduced, it could have a major impact on people’s ability to borrow given that our median incomes haven’t risen as fast as the house prices.

Until the supply side of things are taken care of where we have more affordable homes built for the first-home buyers segment, the demand for housing will not go down based on the number of people that are current looking to buy in Auckland. With around 45,000 more people coming in Auckland, the demand is only going to increase and this will always put pressure on the housing market."

Tips for first-home buyers

Start with the basics—the common advice that mortgage advisers and property dealers have for first-home buyers.

Nathan Saminathan, Mortgage Masters

“If you are a first-home buyer, you must consider:

• Your income level and if you married then your partner’s income can be included

• You need to have saved a deposit. We work on 10% deposit for the first-home buyers. The deposit can be your personal savings, KiwiSaver, and a cash contribution from family and government grants. There are conditions that apply as well.

• You need to meet mortgage brokers or lenders to assess your eligibility to borrow

• Once you know the amount of money that you can borrow plus your deposits, you’ll figure out the maximum purchase price that you are entitled to buy

• Then you search the property with your real estate agents and on the Internet

• You must consider the location where you are comfortable to live”

Venu Gopal, Squirrel Mortgage

“First-home buyers should

• Try to avoid outside debts

• Keep one credit card with a minimum/lower limit

• Don’t take any hire purchases

• Create savings history

• Don’t change the jobs often. Consistent and long-term employment is good for the lenders.

• Don’t operate too many accounts. Simply keep two accounts, one for day-to-day transactions and income and expenses and the second one for savings.

• Opt for Kiwi Saver”

Rakesh Bansal, Kiwi Mortgage

“Some of the tips are:

• Talk to a good and experienced mortgage adviser. It will not cost you anything but you will benefit from their expertise and knowledge as they will provide options while guiding you through the whole process

• Maintain clean credit history that does not have defaults/too many enquiries in a short span of time. You may request your own credit history file free or at nominal charge

• Maintain good account conduct with no dishonours/unauthorised overdrafts

• Resist avoidable purchases and continue saving towards deposit, including KiwiSaver

• Keep your debt to minimum possible

• Use your credit card sensibly and pay off in full at the due date. Do not use a credit card for cash advances.

• Have proper due diligence while purchasing. Ask questions—it is your right

• Seek advice from experts: real estate agents, mortgage advisers, solicitors, and accountants

• Get a bank approval in place before you make an offer

• Get the bank to approve the property before you make unconditional offer or bid in auction

Is it the right time to invest?

While most Aucklanders feel that with the rising house prices, the dream of owning a house seems to go further away, experts say otherwise.

Venu Gopal, Squirrel Mortgage

“For first-time buyers, there is no good time or bad time. I would say that for first-time buyers, any time is a good time because the focus is not for short-term capital gain but basically to save rent and get on the property ladder for future capital gains.

“For investors, it is still looking positive because of low-interest rates, high rental demand and a shortage of housing supply.”

Nathan Saminathan, Mortgage Masters

“If you are first homebuyer with a long-term view, any time is good. I have purchased for more than market value but kept it for a long time. Now, it is three times the purchase price.

“A good property that you like to live in does not come often. This is the difficult choice when choosing a property. Always remember that you are not the only buyer in the market. If you like a property and it is within your range, then you make an offer. By doing so you have first right of refusal.

“Investors need to have 40% deposit and if you have the ability to buy, do some homework before you embark on the project.

“The property is at peak now. It can go both ways. Recently, an article on Australian Property Market said that they think that a property crash is imminent, and if anything happens in Australia, it will have an impact on the New Zealand market.”

Rakesh Bansal, Kiwi Mortgage

“Any time is a good time to buy the house you are going to live in. Quite simply, pay your own mortgage, not someone else’s. The house prices may fluctuate, but in the long run and every reasonable aspect put together, owning is a better option than renting.

“As for investors, it depends on how much equity you have to leverage it off against. Be selective in what you buy. In any market correction, the not so good properties in the not so good areas may potentially suffer the first and the most, buy if have the capacity to hold.”

Prateek Malhotra, Everest Home Loans

“This would depend on individual circumstances. If you are a first-home buyer and would like to get on to the property ladder, as long as it is within your budget, buying your own home is a good idea. It gives you the opportunity to provide some stability to yourself and your family. You don’t have to move houses just because the landlord decides to sell the house and has given you the notice to move out.

“For an investor, numbers need to stack up and some seasoned investors are still out there buying properties and adding values to them to be able to get more rent out of them. It would be ideal if you could buy in a down market and sell in an upmarket but it doesn’t happen to a lot of people.”