Should I buy my first home in the current market?

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Posted in lending; Tagged first home; Posted 16 months ago by Futurebound

If you're wondering if now is the right time for you to buy your first home, then keep reading. The housing market is receiving a lot of media attention at the moment as house prices continue to fall and interest rates continue to rise.  

This article aims to give you some context to New Zealand’s (and Wellington’s) current housing market and will talk through the three main points you may be considering before buying your first home that might be keeping you on the fence.  

 

The Wellington housing market has had its steepest price drop in decades over the past few months, with the average house price decreasing by 17%.

 

Supply of housing within the Wellington region has also increased two-fold with supply almost doubling in the last 12 months.

 

I call this the “Golden Zone” for first-home buyers; as for the first time in years house prices are more attainable and an increase in supply means that you have a lot more options than you did a year ago.  

 

 

So should I buy in this current market? Yes! There is no better time to buy a house.

 

As a first-home buyer, there is no better time to buy than at this point in time. What was an overpriced market is now correcting itself and first-home buyers can really seize this opportunity and actually get a good deal.

 

The three things that you may be considering before buying your first home.

 

 1. Interest rates are too high currently. 

Yes, interest rates are high at the moment and may keep trending up a bit more over the next six months or so. However, house prices are the lowest they’ve been in a long time.

 

While rising interest rates are seen as a big deterrent for first-home buyers to get into the market, we need to remember that over a 20-year mortgage period, these will always fluctuate.

 

High interest rates are temporary, but a low purchase price is permanent. This reason is why you want to consider buying your first house now to take advantage of these lower house prices. If you’re wanting to wait until interest rates come down, house prices are going to go up and then you will end up paying more for the same property.

 

An important thing to consider, however, is the house has to still be affordable for you and your unique financial situation; ensure you can handle your mortgage repayments and give yourself a bit of a buffer for interest rate fluctuation. 

 

 

2. What if I purchase now and the value of my house drops even further?

 

You may have heard this expression before when it comes to investments; it's not about timing the market, it’s about time in the market.

 

It is highly unlikely that you’re going to figure out when the real trough of the housing market is; with some economists believing we are there already. This consideration will only affect you if you’re planning to sell your new home within 6 months to a year from now. If you're planning on holding the property I.e. living in it for a number of years, then this consideration does not affect you. All you have to do is hold on to your property for long enough to make a profit when you go to resell it. 

 

 

3.  I have a deposit that is less than 20% 

 

Banks are being tougher in the area of high LVRs (loan to value ratios) at the moment. This means it is currently difficult to get low deposit lending and you’ve got very little choice than to go to through your own bank, and even then, they may still say no. If you find yourself in this situation, you can pivot to looking at buying a new build turnkey property where you pay a 10% deposit up front and then 90% at the end when the build is finished. Although you won’t be able to move into the property right away, this is a great way to circumvent the banks tougher lending in the current market. 

 

 

If you’re now motivated to move forward and buy your first home please contact us via our online form to book in for a mortgage chat today. 

 

 

Keep in mind this article is providing general information and not individual financial advice.  

 

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