Should I or should I not buy now

[AndrewC]

I sold my house earlier, thinking that the property price will drop further as predicted by many gurus in this forum. However, it seems that not only the price doesn't drop but there is a trend that it is going to return back to the price in 2007. Now, should I buy or wait longer, I am a bit worry we will lose our affordability once the market returns to that of 2007.

[watchful]

Andrew, really sorry to hear about that. Why don't you ask the guru Hickey for comment on his prediction of a 30% fall on his wallowing interest site, Trass to look into his clouded crystal ball or preach some more voodoo math or Danica Hampton about her predictions that the NZD would be below US40C by now?

Basically, do your own research and trust your gut. My gut would suggest now is not the best time to buy but I am certainly no guru...

[Rosco]

Hi Andrew,

If you are buying a rental, anytime is the right time to buy, as long as you buy the right property.

The right property depends on your situation, but generally something positive. As long as you can afford to hang onto the property for the long term, 10 years plus, then it doesn't matter what property does short term.

So say you buy a property today for $340,000, and it breaks even every year for the next 10 (so you don't need to put in any money at all). If in a years time the property value drops to $300,000 (I personally don't think this will happen, but it is nice to review the worst case), does it really matter? If you keep holding it and in 10 years its worth $500,000, does it really matter what happens in years 1-3?

I think every investor and so called expert doesn't have a clue what will happen in the short term (1-3 years), but I think most investors and experts would agree that property will be worth more in 10 years than it is today.

So to sum up
1) Property investment is long term and you make gains by holding for 10 years plus
2) Don't believe anyone, instead as watchful suggested listen to everyone then make up your own opinion.
3) If you buy a break even or better property, then there is no risk because you are not having to put in money.

Ross

[Samuelj]

I sold my house earlier, thinking that the property price will drop further as predicted by many gurus in this forum. However, it seems that not only the price doesn't drop but there is a trend that it is going to return back to the price in 2007. Now, should I buy or wait longer, I am a bit worry we will lose our affordability once the market returns to that of 2007.

I'm in the same boat .. sold my place, then decided there was no way i was going to pay the kind of prices offered at the time (middle of last year) so i'm renting for now.

i might add that comments from various letting agencies when i was looking for a place suggested that quite a few pple in auckland were doing the same thing

I dont see how prices can remain so unaffordable permanently so i'm going to hold off for a while longer (fingers crossed)

having said that, it seems like a good idea to keep a close eye on trademe etc and if you see something that you think is exactly what you would like and the price isnt ridiculous that why not buy

As many people have said repeatedly here and elsewhere its pretty much impossible to accurately time the market so if the right property comes along ....

the important thing is not to get into "Oh my god, ive got to buy now or i'll miss out" mode

cheers, Sam

[evie]

Hi all - anytime is good time to buy. BUT when the opportunity comes along, make sure you are ready (financial resources, preapprovals etc). There are bargains out there.

Just dont buy for the sake of buying or because of greed. Property investment hand in hand with passion for property will take you a long way.

Just recently a $435K 3year old B&T house 156m2 with 1200m2 land area was sold for $70k less than the asking out at Henderson... Do you think it is a good buy?

[Fingers]

I agree with Rosco and Evie, anytime is a good time to buy if you intend to buy a rental property and keep it for the long term (i.e. at least 10 years).

One thing I would add is this: Properties in the lower quartile are always in demand from first time buyers and property investors. If you purchase at this end of the market you are reducing the amount of risk involved (unfortunately it works both ways & you also reduce the amount of capital gain you will achieve in the long run).

Another thing my cousin told me (he owns in excess of 20 rental properties) is that whenever he buys another property he always manages to pay the mortgage, even if he is not sure at the time. When I look back at the properties I have bought (only 3 rentals) I had worries that did not prove to be true. Like my cousin, I have always been able to pay the mortgages. I keep money aside for periods of vacancies or emergency maintenance. Forward planning!

Good luck.

Fiingers

[watchful]

Very true about buying a rental property as an investment. There should always be times when it is a good time to buy such property. I recall not too long ago, however, when even lower quartile properties needed to be negatively geared. This is particularly the case when interest rates are high.

Posters are correct when they say that there are CF+ opportunities out there, however not many at the level of risk that I am comfortable with. With long term rates climbing, I am not about to purchase a Sth Auckland dunger with potentially higher than normal maintenance costs at a 9% return. It would not take many more rates hikes to turn this into more of a lemon.

I am unsure whether the two previous posters who sold up, sold their rental investments or PPOR investments. If the former then I wouldn't be too stressed, if the latter then I would be a little more concerned. At the moment affordability isn't improving. Short term rates are probably close to (if not at) their bottom, and prices are firming - panic has left much of the market. Whether it will return is the question, but will it return as abruptly in the areas where these investors sold?

An example I always recall was that of a distant relative. Owned a nice home in Pt Chev and decided to sell up when her husband started a business in Whangarei. Bought a nice place up there for the money they realised from the sale, however upon return to Auckland was in for a shock as they couldn't remotely afford their Pt Chev house anymore.

My advice, keep a very close eye on your market, interest rates, rent trends (yours) and affordability. Be in a position to re-enter quickly and on your terms or wait out this cycle and pray for panic.

[Green Fish]

AndrewC: Auckland house prices will keep going down. Look at things again in September 2010, and ask yourself whether it is still cheaper to rent. If it's only 10% or less cheaper, consider buying. If not, just wait.

The will be a lot of action re interest rates in the intervening period - so just sit tight and be patient.

[evie]

AndrewC: Auckland house prices will keep going down. Look at things again in September 2010, and ask yourself whether it is still cheaper to rent. If it's only 10% or less cheaper, consider buying. If not, just wait.

The will be a lot of action re interest rates in the intervening period - so just sit tight and be patient.

i have been following your comments and thoughts on all sorts of discussions and have found this one to be very thoughtful and prudent. Nice.

[watchful]

AndrewC: Auckland house prices will keep going down. Look at things again in September 2010, and ask yourself whether it is still cheaper to rent. If it's only 10% or less cheaper, consider buying. If not, just wait.

The will be a lot of action re interest rates in the intervening period - so just sit tight and be patient.

This will truly be a good thread to resurrect in September 2010.

If you are looking at affordability (cheaper to rent than buy) then let's hope inflation isn't being beaten back by 10%+ rates by then because your own home affordability will be out the window, and I think that it will then be cheaper for you to rent - for the rest of your life.

[evie]

I think you are thinking of buying your own place? and not a PI. So if you can afford it, have preapprovals and found some where which is selling below market value (maybe $50K less?) - you should consider or at least still keep looking. I just got a place and usually (high on the waves) it would have gone for $440k but got it for much less.

Of course having said that - please make sure you do your homework on repayments, negotiate interest rates etc. There are bargains out there. And structure your repayments for your own home in such a way as if you were to rent it out (touch wood, if you had to rent it out) so that it is easily rentable and covers your repayments.

[leapy]

The truly wise will never tell you they are.

[evie]

The truly wise will never tell you they are.

Are what? Sorry, I don't follow...