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  Reply # 1161788 24-Oct-2014 22:28
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mattwnz:
joker97:
mattwnz: I would never buy a house at an auction, as you have to make sure you have done full due diligence before hand, such as building inspections, lawyer checking everything, lim etc. So you are down probably more than 2k before you even put in a bid. Auctions though can be good for sellers when there is a lot of interest in the property. Tenders are also not great for buyers, although unlike an auction, you can put in conditions on the tender.


if you have this mentality it will be incredibly tough to buy a house in auckland or perhaps even christchurch


That's why I wouldn't buy in those two areas. At some stage the bubble is going to burst, as the property bubble in those areas is being fueled by greed and cheap credit. As soon as interest rates rise, there will be people who will be left exposed.


Then, because it will have flow-on effects on the entire country, the government will step in to stop it turning into a huge economic disaster and the provinces will be further screwed. 
People are already hurting out there and I expect it's going to get worse. 


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  Reply # 1161818 24-Oct-2014 22:51
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Elpie:
mattwnz:
joker97:
mattwnz: I would never buy a house at an auction, as you have to make sure you have done full due diligence before hand, such as building inspections, lawyer checking everything, lim etc. So you are down probably more than 2k before you even put in a bid. Auctions though can be good for sellers when there is a lot of interest in the property. Tenders are also not great for buyers, although unlike an auction, you can put in conditions on the tender.


if you have this mentality it will be incredibly tough to buy a house in auckland or perhaps even christchurch


That's why I wouldn't buy in those two areas. At some stage the bubble is going to burst, as the property bubble in those areas is being fueled by greed and cheap credit. As soon as interest rates rise, there will be people who will be left exposed.


Then, because it will have flow-on effects on the entire country, the government will step in to stop it turning into a huge economic disaster and the provinces will be further screwed. 
People are already hurting out there and I expect it's going to get worse. 



It will likely be savers who will wear some of the cost if banks do experience problems, under the new rules. Really they should be making it harder to borrow cheap credit. Some people are buying houses for what they can afford to borrow, rather than looking at . Stopping overseas buyers who are not paying tax into the NZ economy should also help.  I had heard that something like 50% of all houses in Christchurch are being sold to investors.

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  Reply # 1161822 24-Oct-2014 22:59
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Elpie:
mattwnz:
joker97:
mattwnz: I would never buy a house at an auction, as you have to make sure you have done full due diligence before hand, such as building inspections, lawyer checking everything, lim etc. So you are down probably more than 2k before you even put in a bid. Auctions though can be good for sellers when there is a lot of interest in the property. Tenders are also not great for buyers, although unlike an auction, you can put in conditions on the tender.


if you have this mentality it will be incredibly tough to buy a house in auckland or perhaps even christchurch


That's why I wouldn't buy in those two areas. At some stage the bubble is going to burst, as the property bubble in those areas is being fueled by greed and cheap credit. As soon as interest rates rise, there will be people who will be left exposed.


Then, because it will have flow-on effects on the entire country, the government will step in to stop it turning into a huge economic disaster and the provinces will be further screwed. 
People are already hurting out there and I expect it's going to get worse. 



Agreed.

You often read that people should consider what they can pay if rates go up rather than what they can pay now.

I always wonder how far up are people supposed to consider this? Another 5%? Another 10% Another 20%?

It's a facile response really because the borrower has no idea - there is no ceiling; this is especially true because you cannot do what you can do in places like the USA and UK - fix the rate for the whole life of the mortgage.

In the UK they have things called 'tracker' rates - you pay so much above or below base rate (OCR). They had some people who were actually technically owed money by the lender when Base Rate hit zero!





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  Reply # 1161847 24-Oct-2014 23:44
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Geektastic:
Elpie:
mattwnz:
joker97:
mattwnz: I would never buy a house at an auction, as you have to make sure you have done full due diligence before hand, such as building inspections, lawyer checking everything, lim etc. So you are down probably more than 2k before you even put in a bid. Auctions though can be good for sellers when there is a lot of interest in the property. Tenders are also not great for buyers, although unlike an auction, you can put in conditions on the tender.


if you have this mentality it will be incredibly tough to buy a house in auckland or perhaps even christchurch


That's why I wouldn't buy in those two areas. At some stage the bubble is going to burst, as the property bubble in those areas is being fueled by greed and cheap credit. As soon as interest rates rise, there will be people who will be left exposed.


Then, because it will have flow-on effects on the entire country, the government will step in to stop it turning into a huge economic disaster and the provinces will be further screwed. 
People are already hurting out there and I expect it's going to get worse. 



Agreed.

You often read that people should consider what they can pay if rates go up rather than what they can pay now.

I always wonder how far up are people supposed to consider this? Another 5%? Another 10% Another 20%?

It's a facile response really because the borrower has no idea - there is no ceiling; this is especially true because you cannot do what you can do in places like the USA and UK - fix the rate for the whole life of the mortgage.

In the UK they have things called 'tracker' rates - you pay so much above or below base rate (OCR). They had some people who were actually technically owed money by the lender when Base Rate hit zero!



I believe 8-9% is seen as what rates may go up to in the medium term. But in the 80's we had rates well into the double digits.
Ironically the OCR has gone up about  1 % over the last year, but interest rates seem to be just as low as ever, and savers haven't benefited much either. The only winners are banks, and they are too big to fail. Someone will have to pay at the end of the day if the bubble bursts, and it will be tax payers, savers or borrowers getting their house purchased from under them.

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  Reply # 1161865 25-Oct-2014 00:08
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mattwnz:
I believe 8-9% is seen as what rates may go up to in the medium term. .


they're said 7-8% since 2007. nothing.

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  Reply # 1161866 25-Oct-2014 00:18
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joker97:
mattwnz:
I believe 8-9% is seen as what rates may go up to in the medium term. .


they're said 7-8% since 2007. nothing.


GFC happened in the meantime though. It will happen eventually.

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  Reply # 1162119 25-Oct-2014 19:15
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mattwnz:
I believe 8-9% is seen as what rates may go up to in the medium term. But in the 80's we had rates well into the double digits.


My very first house in NZ had a mortgage rate of a hair under 23%. This is higher than most credit card interest rates are now. I doubt we will see interest rates that high again in my lifetime but you never know. 

NZ needs to shake up the whole way mortgages are structured. People here go into them, on low credit costs, and take them out for 25-35 years. This is a generation. It pretty much guarantees that many people hit retirement years still with mortgages. Nobody in their 30's or 40's now can be certain that there will be any government help when they hit retirement but Kiwis go blissfully on, accumulating debt and thinking that the equity tied up in their house is a realisable asset to see them out through old age. Ha! I think some people are in for a shock. 

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  Reply # 1162120 25-Oct-2014 19:20
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mobile.bloomberg.com/news/2014-10-07/at-78-former-executive-still-flips-burgers-for-7-98.html

Can't blame home buyers though. In many centres cost of owning and renting are similar

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  Reply # 1162161 25-Oct-2014 21:05
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joker97: mobile.bloomberg.com/news/2014-10-07/at-78-former-executive-still-flips-burgers-for-7-98.html

Can't blame home buyers though. In many centres cost of owning and renting are similar


Working into old age seems to be common in North America. As to the other, often people don't compare costs accurately. Kiwis are great at deferring maintenance on their houses. It seems a lot of people think that mortgage + insurance + rates are all that's involved in home ownership costs. Factor in annual, ongoing maintenance and repairs, plus the cost of having money tied up in a non-earning asset and the comparison may be quite different. Great if you are already in a market like Auckland's where, for the short term anyway, property is appreciating, but not so good elsewhere where values are almost static (or declining). 

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  Reply # 1162178 25-Oct-2014 22:14
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Elpie:
mattwnz:
I believe 8-9% is seen as what rates may go up to in the medium term. But in the 80's we had rates well into the double digits.


My very first house in NZ had a mortgage rate of a hair under 23%. This is higher than most credit card interest rates are now. I doubt we will see interest rates that high again in my lifetime but you never know. 

NZ needs to shake up the whole way mortgages are structured. People here go into them, on low credit costs, and take them out for 25-35 years. This is a generation. It pretty much guarantees that many people hit retirement years still with mortgages. Nobody in their 30's or 40's now can be certain that there will be any government help when they hit retirement but Kiwis go blissfully on, accumulating debt and thinking that the equity tied up in their house is a realisable asset to see them out through old age. Ha! I think some people are in for a shock. 


In order to assess your wisdom, can you please advise me how long you will be living? ;-)





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  Reply # 1162179 25-Oct-2014 22:18
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joker97: mobile.bloomberg.com/news/2014-10-07/at-78-former-executive-still-flips-burgers-for-7-98.html

Can't blame home buyers though. In many centres cost of owning and renting are similar


Not sure what it is like now, but up until I left the UK 10 years ago, renting usually cost more there.

For example, our mortgage was around $650 equivalent per month and our tenant paid $2000 a month for our flat which we kept for 18 months after moving.

Tenants also pay the equivalent of the rates too rather than the landlord as here.

Landlords have much higher standards to adhere to though so their repair and maintenance liabilities are higher - and court enforceable.





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  Reply # 1162192 25-Oct-2014 23:20
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hence renting, owning = similar within a few degrees of unpredictability in owning

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  Reply # 1162193 25-Oct-2014 23:21
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mattwnz:
joker97:
mattwnz:
I believe 8-9% is seen as what rates may go up to in the medium term. .


they're said 7-8% since 2007. nothing.


GFC happened in the meantime though. It will happen eventually.


the way it's extrapolating, the volcanoes in AKL will erupt before it gets to 9%.

BNZ just advertised 5.85 (before haggling) fixed for 3 years

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  Reply # 1162202 26-Oct-2014 00:02
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joker97:
mattwnz:
joker97:
mattwnz:
I believe 8-9% is seen as what rates may go up to in the medium term. .


they're said 7-8% since 2007. nothing.


GFC happened in the meantime though. It will happen eventually.


the way it's extrapolating, the volcanoes in AKL will erupt before it gets to 9%.

BNZ just advertised 5.85 (before haggling) fixed for 3 years


Certainly I think something is going to happen, as property prices in Auckland and Chch can't keep going up at their current rates, and someone is going to get hurt. I think it is likely to be savers, where savings in banks aren't guaranteed. Prior to the GFC, many people with savings put their money into finance companies. Since then, people have put that money into both the bank, where they think it is safe, and into properties, and also some into shares. Therefore banks are flush with cash to lend to people to buy houses, and they are paying savers poor interest rates. Property in NZ is too big to fail in large areas, because if property prices plunge, then banks are going to have problems, and if that happens then savers will take a haircut with the new open banking resolution. http://neweconomics.net.nz/index.php/2013/04/saver-bailout-is-coming-to-new-zealand/

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  Reply # 1162207 26-Oct-2014 00:54
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Geektastic:
Elpie:
mattwnz:
I believe 8-9% is seen as what rates may go up to in the medium term. But in the 80's we had rates well into the double digits.


My very first house in NZ had a mortgage rate of a hair under 23%. This is higher than most credit card interest rates are now. I doubt we will see interest rates that high again in my lifetime but you never know. 

NZ needs to shake up the whole way mortgages are structured. People here go into them, on low credit costs, and take them out for 25-35 years. This is a generation. It pretty much guarantees that many people hit retirement years still with mortgages. Nobody in their 30's or 40's now can be certain that there will be any government help when they hit retirement but Kiwis go blissfully on, accumulating debt and thinking that the equity tied up in their house is a realisable asset to see them out through old age. Ha! I think some people are in for a shock. 


In order to assess your wisdom, can you please advise me how long you will be living? ;-)


If I had a mortgage that hit 20% + I would probably keel over with a heart attack ;-)

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