Real estate, post COVID-19 level 4 (since 2020)

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#3242249 29-May-2024 12:07

I can't imagine how anyone would service debt in excess of six times their income. If you borrow $600k on a $100k income (pre-tax) then you would have very little left to live on after tax and debt servicing outflows.

tweake

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#3242250 29-May-2024 12:11

wellygary:

tweake:

stuff article https://www.stuff.co.nz/money/350292161/what-will-new-debt-income-rules-mean-you

At those ratios, owner-occupiers with a gross annual income of $126,411 (the current household average) would be able to borrow up to $758,466. An investor with the same income could borrow $884,877.

so basically it favors investors and allows them to outbid everyone else especially fhbers.

Not really because you missed the fine print, that you have to subtract existing debt from the limit, Investors only get the higher limit if they basically don'r have any other debt, if they do, its deducted from the limit

Investment
Borrowing over 7 x gross (before tax) income, minus any debt, is considered high-DTI.

Take the example of a household with a total annual income of $100,000 and total debt of $20,000. If they borrow over $680,000, they will be considered high-DTI."

https://www.rbnz.govt.nz/education/explainers/dti

fair enough.

but for someone with no debt, being an investor is advantageous. considering that most investors are mum/dad only owning one investment property. eg i have no debt so its helps me become a landlord. i can use equity in my own home in lue of deposit (i assume that hasn't been changed) and interest can be a tax right off. plus everyone else is limited more than me in buy price. a nice fat incentive for people to become property investors.

tweake

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#3242251 29-May-2024 12:14

alasta:

I can't imagine how anyone would service debt in excess of six times their income. If you borrow $600k on a $100k income (pre-tax) then you would have very little left to live on after tax and debt servicing outflows.

pretty common. nz average house is about 10 time average income. 6 times is a bottom end house.

BlargHonk

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#3242252 29-May-2024 12:15

tweake:

stuff article https://www.stuff.co.nz/money/350292161/what-will-new-debt-income-rules-mean-you

At those ratios, owner-occupiers with a gross annual income of $126,411 (the current household average) would be able to borrow up to $758,466. An investor with the same income could borrow $884,877.

so basically it favors investors and allows them to outbid everyone else especially fhbers.

I think it will be interesting to see how it affects investors with multiple houses. It would be pretty easy for an investor with a paid-off primary residence to get one or two investment houses with this DTI, but more than that it will be a struggle?

wellygary

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#3242253 29-May-2024 12:17

tweake:

fair enough.

but for someone with no debt, being an investor is advantageous. considering that most investors are mum/dad only owning one investment property. eg i have no debt so its helps me become a landlord. i can use equity in my own home in lue of deposit (i assume that hasn't been changed) and interest can be a tax right off. plus everyone else is limited more than me in buy price. a nice fat incentive for people to become property investors.

Under these new rules, that equity would be classed as Debt, as you would need to find a way to turn the equity into cash to actually meet the eventual settlement cost,

mudguard

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#3242258 29-May-2024 12:25

wellygary:
tweake:

fair enough.

but for someone with no debt, being an investor is advantageous. considering that most investors are mum/dad only owning one investment property. eg i have no debt so its helps me become a landlord. i can use equity in my own home in lue of deposit (i assume that hasn't been changed) and interest can be a tax right off. plus everyone else is limited more than me in buy price. a nice fat incentive for people to become property investors.

Under these new rules, that equity would be classed as Debt, as you would need to find a way to turn the equity into cash to actually meet the eventual settlement cost,

Yeah it might give a few multiple property owners a shock if they move banks and get assessed under the new criteria.

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tweake

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#3242259 29-May-2024 12:34

wellygary:

tweake:

fair enough.

but for someone with no debt, being an investor is advantageous. considering that most investors are mum/dad only owning one investment property. eg i have no debt so its helps me become a landlord. i can use equity in my own home in lue of deposit (i assume that hasn't been changed) and interest can be a tax right off. plus everyone else is limited more than me in buy price. a nice fat incentive for people to become property investors.

Under these new rules, that equity would be classed as Debt, as you would need to find a way to turn the equity into cash to actually meet the eventual settlement cost,

now that will make things interesting.

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#3242266 29-May-2024 13:10

tweake:

alasta:

I can't imagine how anyone would service debt in excess of six times their income. If you borrow $600k on a $100k income (pre-tax) then you would have very little left to live on after tax and debt servicing outflows.

pretty common. nz average house is about 10 time average income. 6 times is a bottom end house.

Some people are already paying rent that would equate to more than the repayments on a mortgage of greater than a DTi of 6.

tweake

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#3242283 29-May-2024 13:26

Senecio:

Some people are already paying rent that would equate to more than the repayments on a mortgage of greater than a DTi of 6.

sadly so, and i expect that to get worse.

cddt

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#3242290 29-May-2024 14:00

alasta:

I can't imagine how anyone would service debt in excess of six times their income. If you borrow $600k on a $100k income (pre-tax) then you would have very little left to live on after tax and debt servicing outflows.

Explains why stores such as S&C are going under. No one has money to spend at retailers because it all goes to debt servicing, no matter where on the income spectrum you sit.

My referral links: BigPipe | Mercury

alasta

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#3242292 29-May-2024 14:02

Senecio:

Some people are already paying rent that would equate to more than the repayments on a mortgage of greater than a DTi of 6.

Yes, but renters don't pay for council rates, insurance, maintenance, body corporate fees, etc.

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tweake

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#3242293 29-May-2024 14:06

alasta:

Senecio:

Some people are already paying rent that would equate to more than the repayments on a mortgage of greater than a DTi of 6.

Yes, but renters don't pay for council rates, insurance, maintenance, body corporate fees, etc.

but renters do not get anything out of it at the end.

guys at work are paying what i pay in mortgage on a 3brm house for a 1 bedroom flat.

wellygary

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#3242295 29-May-2024 14:08

tweake:

guys at work are paying what i pay in mortgage on a 3brm house for a 1 bedroom flat.

In the Same suburb?

Traditionally renting has allowed you to live in suburbs closer to the CBD that were too expensive to buy in...

tweake

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#3242297 29-May-2024 14:13

cddt:

alasta:

I can't imagine how anyone would service debt in excess of six times their income. If you borrow $600k on a $100k income (pre-tax) then you would have very little left to live on after tax and debt servicing outflows.

Explains why stores such as S&C are going under. No one has money to spend at retailers because it all goes to debt servicing, no matter where on the income spectrum you sit.

yes, but there is a lot of older people driving around in nice new cars, no doubt all funded from house sales.

current generation is paying for last generations life style, plus the interest rate. the cost of that is going to be with us for many many years to come.

they all talk about not spending due to the "cost of living crisis" but the biggest cost is housing and no one is doing anything on that. most stories are about cost cutting so you can spend MORE on housing. got to keep those profit margins up.

tweake

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#3242298 29-May-2024 14:15

wellygary:

tweake:

guys at work are paying what i pay in mortgage on a 3brm house for a 1 bedroom flat.

In the Same suburb?

Traditionally renting has allowed you to live in suburbs closer to the CBD that were too expensive to buy in...

it rural so its hard to judge, but yeah i think close enough to "same suburb".

edit: this is not new. many people paid high house prices because the mortgage was the same as the rent. yes there is other costs but overall its still a win.

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