Real estate, post level 4

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#2896840 4-Apr-2022 15:59

I locked in a 3-year rate about a month ago. Took a bit of an increase in rate. Looking at what is happening now, I'm happy with the rate I got. In two months I can do a rent review, which will recover the increased repayments.

Mike

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#2897824 6-Apr-2022 21:13

https://www.newshub.co.nz/home/money/2022/04/property-flippers-in-for-rude-awakening-as-housing-market-slows-down-mortgage-broker.html

GV27

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#2897887 7-Apr-2022 06:56

Batman:

i have heard "prices will drop" since the day i started having an interest in property, that was in 2002.

if the economists stick with their prediction eventually they will be correct, 20 years and counting.

house prices will fall 20-30% was what he said during level 4 lockdown in 2020.

is 2022 the year they will be correct, who knows

Prices did walk back during the GFC.

I don't think anyone could have realistically expected the RBNZ to not only print billions of dollars during Covid but also keep interest rates low as inflationary pressures ramped up, after years of softly-softly when it came to addressing house price rises

If they'd just let things be then yes, highly likely we would have seen a walkback in values due to Covid, instead of them spiking by 30% in 12 months.

Geektastic

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#2897897 7-Apr-2022 08:05

I don’t think prices would have changed much in Covid in that scenario.

If anything they would have sat still because of the difficulty of moving, doing open homes and so on. I can’t see much reason for them to have gone down.

Property has gone up in the west more or less permanently since home ownership outside the Gentry became a reality. If you graph it over 100 years it only trends upwards. Expectations of any fall except as a short term blip are destined not to be fulfilled.

GV27

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#2897902 7-Apr-2022 08:17

How many times have we seen a 30% increase in 12 months in the last 100 years? That's 30% of already massively higher prices than any previous reference point relative to wages in modern NZ?

I can trace our current issues back to the late 1980s, but for a good chunk of that time it was a steady and slow rise, if not level in real terms. The last fifteen years have been ridiculous, and we've largely sat back and left our tax system alone and neglected it and now we seem to be wondering why it isn't fit for purpose.

Gosh, I wonder.

tdgeek

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#2897920 7-Apr-2022 09:07

While this is US based commentary its the same here and most other places

https://www.forbes.com/sites/chriscarosa/2021/08/23/covid-or-policy-whats-causing-this-inflation-surge/?sh=2d0dbfbd4c0f

Housing in the US has these housing issues. Much higher rents, much higher house prices, increasing interest rates

Its a sign of the time, not of NZ. Pre covid, the same issues are often global as well. Infrastructure has not kept up, wages have not kept up, so the slow and gradual Salary:House Price multiplier has continued to erode

Divhon88

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#2902023 13-Apr-2022 16:31

How much likely the interest rate will increase?

https://www.newshub.co.nz/home/money/2022/04/ocr-jumps-massive-50-basis-points-hits-1-5-as-reserve-bank-continues-rate-hike-path.html

Our turn key won't be finished in July, knock on wood no more delays. We're paying rent now $350 a week.

Kiwibank is our finance provider so it means we need to go with them. Based on their website their less 20% deposit rate now is 4.99% 1 year, 5.85% 2 years, and 5.99 3 years.

Our purchase price is $669,000 @ 10% deposit. Based on calculator 4.99% for a 30 year term is = $743 + $100 more or less for rates and insurance.

I'm sh*tting my pants now for this $843 a week a complete shock from $350 a week and with this ORC increase this will increase more, right.

What I have done with the finances of my family?

They said the best buy to a house was yesterday!

They said once your in the property ladder it will be easier!

They said one is just paying somebody's mortgage when renting!

It feels like that the magic of marketing just owned my arse big time....

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Handle9

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#2902041 13-Apr-2022 16:42

IMO there’s at least another hundred basis points (1%) of OCR increases coming in the next 12 months. It could well be more. We are coming away from the bottom of the interest rate cycle and I doubt it will get that low again in the next 30 years. I was paying over 10% around 2008-2009, admittedly on a relatively small mortgage.

It’s always painful when you start a mortgage. Inflation makes it easier as you go. You get salary increases, you get used to paying your mortgage and managing your finances. It’s pretty challenging at the start though.

alasta

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#2902043 13-Apr-2022 16:48

I don't know why you would have assumed that interest rates would always be rock bottom.

With capital gains drying up and interest rates increasing the reality is that residential property is no longer a viable investment. I estimate that the market rent for my place would be about $550 a week, whereas I have been incurring an imputed rent of $530 a week with my cost of capital at 2.5%. Increase that cost of capital to 4% and the imputed rent goes up to $760 a week.

tdgeek

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#2902066 13-Apr-2022 18:09

A friend recently took a 5.7% rate for 5 years.

So if they head to that soon for shorter terms, isnt that ballpark for the pre Covid effect? Many in other threads have commented about houses going back to pre Covid levels, well, this is interest rates going back to those levels more or less?

alasta

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#2902083 13-Apr-2022 18:41

I can't see house prices coming back to pre-covid levels, but I think that rising interest rates will drive prices down more than a lot of people would like to think.

Geektastic

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#2902093 13-Apr-2022 19:07

Rising interest rates will hit supply as well as demand. Developers and builders all need lines of credit. The end customer will get the bill for rate rises on those facilities.

Handle9

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#2902097 13-Apr-2022 19:14

Geektastic: Rising interest rates will hit supply as well as demand. Developers and builders all need lines of credit. The end customer will get the bill for rate rises on those facilities.

To some extent. Housing is largely priced on supply and send, not input costs.

What will also happen is a fair number of developers will go insolvent as they can’t cover their costs. This flows down the supply chain and will take some contractors with them.

mattwnz

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#2902156 13-Apr-2022 21:40

It seems to be boom then bust. Lots of houses are being spotted in price lately. 10 % drop in asking price seems normal. But that is often based on inflated prices.

insane

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#2902171 13-Apr-2022 23:04

@Divhon88 Buying at auction is a similar case where your pre-approval is not aligned to any specific interest rate. The bank very craftily tell you to bid away with confidence, and that the interest rate will be sorted out afterwards, like some meaningless afterthought.

Presumably if you were honest in your mortgage application about your living expenses the bank would have already stress tested your ability to repay at higher interest rates. As others have mentioned too, your income will hopefully increase over time making it feel less painful. Think of your extra $500 per week as payment into a long term investment.

Also as your equity increases beyond 20% you'll get a break on your rates.

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