Auckland First Home Buyer Seeking Advice?

[Day Tripper]

My partner and I are looking to buy our first home.

Ideally we are looking to buy in the central Auckland area - specifically Grey Lynn/Westmere/Western Springs.

We have come into some money and have a budget of $650- $700k of which we will have a interest only mortage of $350k -$400k - minimum equity of around 57%.

We have a few questions regarding our situation...

Given our situation - (low mortage payments/high equity) is it still worth us delaying our purchase - how far do you guys think prices have too fall?

Ideally we would like to buy a nicely renovated 3 bedroom villa in Grey Lynn on an average sized piece of land. Currently this type of property is outside of our budget - they seem to being going for around mid 700's up.

If prices were to drop by another 10% though this type of property would be affordable for us. Am i being realistic though in hoping that these kind of properties will drop that much in value?

Are the prices in high demand areas like Ponsonby/Grey Lynn likely to fall in step with other areas?

Secondly do you think that the supply of houses on the market will continue to increase as the year goes on?

Looking in these areas at present we were surprised by how few houses are on the market.

Do you think this is because the more high socio areas are more insulated from the recession or that people are still managing to just hold on to their properties and that as the year goes on people will be forced to put their properties up for sale even in the more affluent areas?


Would love to hear the thoughts of some of the wise old heads on this forum! I am confused.

[fpl]

First Home Buyers

Congratulation!

Some pockets are more affordable than others within the suburbs you mention. For example Arch Hill within Grey Lynn. Do your research and find a great agent who knows the area inside out.

No one knows more then others how the market will develop in 2009 / 2010 or beyond. Over the long term it’s also less relevant. Particularly as you are buying your home. For example, if you buy a property for $700,000 now and it doubles in 7 years to $1.4 Mil your equity will be $1 Mil. If you wait and could get the same property for $650,000 and it double in value to $1.3 Mil your equity will still be $950,000. If you buy under value and is increased also to $1.4 Mio your equity would be $1,050,000.

Another way of looking at this is.... if you find a home you fall in love with and you miss out buying it by say $10,000 that’s a $9.62 interest a week.... how would that make you feel?

With the sharp drop in interest rate in the last few months the pressure has eased a lot for people who have to sell. If they could make mortgage payments last year they probably ok now. So I think there will be a short window to buy well and / or to find great deals in these locations. That there aren’t many properties on the market is just a reflection that people don’t have to move and/or sell the property.

People in these suburbs typically have good incomes and unless they lose their income or divorce there is probably little force for them to put a property on the market. So there may be not much change in price or listed properties.

Good luck with your home hunting.

[brettc]

There is nothing to stop you offering what you havefor the villa in Grey Lynn you want, even if you do think its outside the price range. Particulary at the moment, you may well find that someone will take whatever they can get.

If I had $700k for a PPR at the mo, I'd be making $700k offers on anything I liked the look of, regardless of the list

[Green Fish]

Day Tripper: Your penultimate paragraph is right on the mark. Those in the higher-value areas will hold on - while they still have a job.

So the numbers of available properties will rise over time. The question you should ask yourself is whether it's cheaper to rent. I wouldn't go anywhere near buying until the cost got very close to the cost of renting (eg, within 10%).

And when calculating the cost of buying, you have to assume that interest rates will go back up just as quickly as they have gone down, so I would assume a mortgage rate of around 8% for the long haul.

It's still far cheaper to rent, and rents are falling. So sit on the sidelines, try to keep your job, pocket the difference, and wait.

[67910241]

Day Tripper: Your penultimate paragraph is right on the mark. Those in the higher-value areas will hold on - while they still have a job.

From a current resident of Ponsonby living just north of Richmond Rd... Another couple in our neighbourhood reported losing one of their jobs this weekend. That's 3 so far this year (but one already found a new one after less than 6 weeks so they're ok).

There are lots of professionals living around here, but also quite a lot of media and advertising related and people depending on marketing/ad income for living & more. These industries are about to take a serious hit I hear.

And the real estate around is pretty darn expensive when you think of it. The land costs an arm and a leg per m2, the housing is mainly way too old and junky and the doup jobs are mainly shoddy. It's convenient and there are good places to eat and go out around, but when you think of it it's bloody expensive and the local schools aren't that good to justify.

There are many areas on the Shore with cheaper property being inhabited with people on bigger incomes giving the local schools higher deciles. This ratio actually probably makes it much worse. Bigger house price tag divided by annual income, less affordability. No point in living centrally if you have no job left to enojoy a very short commute to.

No worries for my Mrs tho not much to lose anymore she's in construction & already had her hours cut to less than 1/2 halfway thru last year...

[67910241]

My partner and I are looking to buy our first home.

Ideally we are looking to buy in the central Auckland area - specifically Grey Lynn/Westmere/Western Springs.

We have come into some money and have a budget of $650- $700k of which we will have a interest only mortage of $350k -$400k - minimum equity of around 57%.

You should not have an issue finding the right property in that price bracket in this area, unless your standards are very high.

Now that the builders and drafters are much cheaper then they were 2 years ago it may also be worthwhile exploring the complete do-ups where you can customise and project-manage the renovation work to ensure it fully meets your own standards, needs and desires. There are worthwhile (albeit total) do ups around here in the 500-550k bracket, which should leave you with about 150k budget to fix the place up. And 150k can go a long way if you are eagerly involved, well organised, careful and ready to do some of the work yourselves.

[exnzpat]

I agree with Green Fish. It is better to rent right now and wait to buy. Homes and locations that are currently out of your price range will fall into your lap as time passes. It will pay to be patient in this market.

If you rush to buy now you will see a loss in asset value. The experts say 30%. I say 65 to 75% (but nobody takes me seriously).

Good Luck.

[Contrail]

If you buy a house now that you can barely afford to meet mortgage repayments with interest rates incredibly low what happens if in 3/5 years when you refinance and interest rate are a lot higher?

Don't buy if you can't repay a lot of your mortgage off in the next 5 years when interest rates are low.

[Rosco]

What about renting your personal house, as effective rental return would be low. Ie house worth $700,000, probably rent for $600? Therefore only 4.5% yield. As earlier posters have said, its cheaper to rent then own.

Then use your cash to buy a number of rental properties. These could be cashflow positive with 100% borrowings, so if you put some cash in, they could easily be positive. Buy a number that suits your risk level. maybe two with low debt levels (ie around 50%) if you are conservative, or 3,4,5 or more if you are risky.

If the market sits flat, at least you properties are paying for themselves, plus generating some extra cash.

If the market rises, then you have several properties.

At the moment I think cash is king. Yes buy property, but make sure it is cashflow positive!



Ross

[watchful]

From a current resident of Ponsonby living just north of Richmond Rd... Another couple in our neighbourhood reported losing one of their jobs this weekend. That's 3 so far this year (but one already found a new one after less than 6 weeks so they're ok).

There are lots of professionals living around here, but also quite a lot of media and advertising related and people depending on marketing/ad income for living & more. These industries are about to take a serious hit I hear.

And the real estate around is pretty darn expensive when you think of it. The land costs an arm and a leg per m2, the housing is mainly way too old and junky and the doup jobs are mainly shoddy. It's convenient and there are good places to eat and go out around, but when you think of it it's bloody expensive and the local schools aren't that good to justify.

There are many areas on the Shore with cheaper property being inhabited with people on bigger incomes giving the local schools higher deciles. This ratio actually probably makes it much worse. Bigger house price tag divided by annual income, less affordability. No point in living centrally if you have no job left to enojoy a very short commute to.

No worries for my Mrs tho not much to lose anymore she's in construction & already had her hours cut to less than 1/2 halfway thru last year...

Two Questions:

1. What areas on the shore have cheaper properties with people on bigger incomes?

2. If it is so bad (rubbish schools, expensive dining, ol junky houses then why don't you just move to Otahuhu?

[k1w1]

Raw nerve, watchful?

Sorry to break it to you, but the Shore is nicer.

To answer your question:

1. Milford, Takapuna, Mairangi Bay for a start

[watchful]

My partner and I are looking to buy our first home.

Ideally we are looking to buy in the central Auckland area - specifically Grey Lynn/Westmere/Western Springs.

We have come into some money and have a budget of $650- $700k of which we will have a interest only mortage of $350k -$400k - minimum equity of around 57%.

I will go against the grain here and suggest that you should buy (carefully). $400K at 6.5% IO will work out at $500 pw. If you can find a property to rent in Grey Lynn (that sells for 700K) for $500 pw then you will have done very well.

I would offer well below the asking price (target 900K properties) and hit the vendor with a cash unconditional offer. May not work but who knows how desperate the vendor is. We have been keeping a close eye on properties in the area and there doesn't appear to be a great deal of budging (probably as a result of vendor expectations due to CVs in the area rising dramatically in Oct 0.

IMHO, properties in these quality areas will retain value. These areas will always be a desirable place to live and as such your investment will be protected against the market.

Or you could put the money in the bank, take your 4% less tax and hope they don't come into any grief.

I would be buying if I were you and taking advantage of the 5 year rates.

My 2c worth.

[watchful]

Raw nerve, watchful?

Sorry to break it to you, but the Shore is nicer.

To answer your question:

1. Milford, Takapuna, Mairangi Bay for a start

Wouldn't say that Mairangi Bay have higher earners than those in city fringe. Takapuna prices cheaper than Grey Lynn? - doubt it and while Milford is great, it is comparable to Grey Lynn in terms of demographic.

I prefer not having to spend most of my day in a queue on the bridge so I'll stay this side thanks.

[k1w1]

and while Milford is great, it is comparable to Grey Lynn in terms of demographic

I guess that's why the schools over there are so fantastic.

[tpr2]

cripes I need to get out more..... I'm missing out.