I have a funny feeling that this year we’ll be helping more people into their first home than ever before. Yes, I think 2012 is a good time to buy a house.

That’s despite the doom and gloom that keeps coming out of Europe. The ongoing quakes in the garden city. And the downbeat articles that grab headlines and sell newspapers. In October 2011 I followed the lead of my new mortgage clients and bought a house after sitting on the sidelines for a couple of years as a renter myself. The conditions seemed good enough then and I can’t see 2012 being much different.

Below are the main reasons I took the plunge recently – some of them are economic, some of them are entirely personal.

Reason 1 – sick of renting, deposit in hand

Although not a first home buyer I was in pretty much the same position. That is, I had a deposit and was sick and tired of handing over rent money every month. Don’t get me wrong – our landlord was awesome and the place we rented was modern and in a great neighbourhood. It’s just that rent money feels like dead money (unless you’re the one receiving it!!)

In addition there were other intangibles I wanted. I like a nice vege garden but there’s no way I’m investing in one only to leave it behind. I was never going to be a tenant forever so why bother? Plus it’s hard to get rid of wallpaper that drives you insane when you’re a tenant. You know what I mean?

And every tenant knows their stay is not guaranteed even if they’ve been there for years. When you buy a house it’s yours, you call the shots about everything. I like that the most.

Reason 2 – house prices have stabilised

If you had the balls, 2009 was probably ‘the’ year to buy a house in recent times because there were a number of pressure sales. Which we did – as a rental. But taking on another mortgage for our own place was a different kettle of fish. We wanted a bit more certainty in the market before getting back in, we wanted prices to stabilise.

Prices had fallen below their 2007 peak and had stopped falling which was good. Will prices go up in the next year or two? Some will, some won’t but nothing spectacular either way. For the moment, Auckland property prices are pretty much flat as a pancake and I think the same could be said in other regions too.

Reason 3 – Interest rates are good

I think they’ll remain this way for a while too. And with rates so low it gives me an opportunity to make larger mortgage repayments as well as put some money away in my holiday account.

Will rates go up in 2012? Probably. That’s because inflation will grow in NZ and Europe might yet fall apart completely. Even so the increases are sure to be well signalled and gradual. Nothing dramatic and no real surprises which means you can plan for them.

I opted to lock in my rental property mortgage for 3 years at 6.45% just recently. That’s a bit more expensive than current 3 year rates (ooops, I jumped  a bit too soon on that one) but at that rate my tenant covers the mortgage completely so no sleepless nights for me.

For my own house I opted to go for the floating rate as this gives me the ability to jump into a fixed rate whenever I want, to pay more than the minimum and make lump sum payments if I choose plus, at approx 5.50% it can’t get much cheaper.

Reason 4 – affordability is there

Everyone talks about how low interest rates make a mortgage more affordable. Which is true but income is what it’s really about. As a self-employed person my income can be a volatile – sometimes it rains, sometimes it’s a drought. Not the kind of thing that always fits nicely with regular boring mortgage repayments. But I’d worked hard in recent years to get more regularity into my income and in 2011 that work began to bear fruit. Ahhhh.

The point is if you’re going to buy a house you must have a job and a good degree of income security because without it paying a mortgage is hell.

Reason 5 – other considerations

In recent years there’s been talk of a housing shortage in NZ. If talk becomes reality then the price of existing property will tend to increase. The NZ economy is on the improve too, just. Certainly the rash of layoffs that happened in 2008-9 has all but stopped. Both bonus factors as far as capital gain goes.

People seem to moan that there are very few houses on the market and the good ones go almost as soon as they’re listed. True. And it’s always been like that. What I really noticed is that it became really easy to spot good ones amongst the duds. The good one’s really do stand out if you’re vigilant.

Some people are saying rent levels will increase in 2012 and I reckon our landlord was about to start typing the letter so we got a wriggle on.

 

Anyway, that was my thinking then and it remains so now. There are clearly economic considerations behind your decision to buy a house but there are also personal reasons that count for as much – maybe more – than just the pure numbers themselves. What do you think?

About Campbell Hastie

Cam is one half of Auckland based mortgage brokers, The Go 2 Guys.

He makes a living by sharing what he knows about mortgages with people, arranging mortgages for people and then insuring people.

He doesn't claim to know everything about mortgages himself which is why he teamed up with David Mercer — hence the ‘2’ in Go 2 Guys.

He writes posts regularly on his blog and has been told he has an ability to share his knowledge in a simple and sometimes memorable way.

Feel free to comment and ask any questions. Contact Campbell Hastie m: 027 697 7789.

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