January 19, 2011
Soaring property prices have made it difficult for many first home buyers, but there is another way to enter the property market. Buying an investment property before your first home is a good way to start building an asset portfolio to help you get ahead.
Michael Furlong, director of MAP real estate, was renting until last year, when he bought his first home at the age of 39. However, his first home was not his first time in the property market; he had bought and sold 18 properties before finally buying his dream home. He says there is a big difference between being a renter and a renter who is also an investor.
“The way you win is to have all of your money work for you throughout that phase that you’re still renting. The term I use is a ‘professional renter’,” he says.
Furlong says there are many reasons why it can be a good strategy to buy an investment property before your home.
“You’ll be able to afford to live in a much better property as a tenant than what you could if you were to buy it – we were living in a A$700,000 or A$800,000 property and only paying A$550 a week [in rent]. As a professional renter you’ve got a much better property for a smaller amount of money for your own personal use.”
Furlong says it also doesn’t suit many people to solidify their first home until their late 30s.
“Renting is a great option in your 20s and 30s if your lifecycle is still in that changing period, if you haven’t met a partner or haven’t had children. You’ll probably move every two to three years anyway and if you were to buy and sell every two to three years the transaction costs would be horrendous,” Furlong says.
By instead building a portfolio over this time, the end result is likely to be much better. “I could almost guarantee that the home someone would buy in their late 30s would be much better than in their 20s – and they’ve got these assets off to the side. Ten years of full tax benefits, gearing and depreciation will set you up for the future far better than [buying a first home earlier in life].”
January 19, 2011
Buying or owning a house right now is a “pretty good idea” with inflation risk rising around the world, says New Zealand’s Tower Investments.
Chief executive Sam Stubbs told a media briefing on investment markets in times of rising inflation housing investment has proved a good decision for Kiwis.
His team believes mortgage rates will rise this year but not nearly as high as the Reserve Bank could lift the Official Cash Rate (OCR) because banks had large enough margins to absorb these rises and still lend on first mortgages. The OCR is currently at 3 per cent and the central bank is not forecast to lift it more than 65 basis points in the next 12 months.
Asked if suggesting buying a house as a hedge against inflation contradicted Reserve Bank and Government advice to Kiwis to quit their obsession with residential property and get saving, Stubbs said the central bank was trying to avoid another property market bubble burst.
“There’s no indication that will come along but equally, our argument goes that if you have the option of buying a house and you are worried about what will happen to the value of that house over the long term….we think that with rising interest rates and inflation…it will get ever more expensive for you to buy this thing if inflation comes along and we believe it will.”
Housing as an investment “doesn’t look like bad value right now”, he says.
Mortgage rates looked like being “reasonable” for the short to medium term because banks were keen to lend on mortgages, the lowest-risk form of lending.
“We’ve been through the global financial crisis now, if banks wanted to exit the mortgage markets in New Zealand they’ve had plenty of opportunity but they chose not to. They’ve chosen to withdrawn from commercial and industrial (lending), that’s why so many small and medium enterprises are hurting.”
January 13, 2011
Residential property values are 0.9 per cent below a year ago and 5.8 per cent below the market peak of 2007 in the December report of Quotable Value (QV).
The property market continued to decline in December but the latest survey carried out by QV.co.nz suggested some consumer confidence may be returning.
“There are now more people who think that house prices will rise in 2011 than those who believe they will fall,” said QV.co.nz research director Jonno Ingerson.
The December report showed up differences between rural and urban areas.
Values of residential properties across all rural areas stayed relatively flat through until May last year before steadily dropping for the rest of the year. By the end the year values were 2.5 per cent below the same time last year.
January 11, 2011
A grey area in rental housing legislation has been cleared up so that tenants cannot be kicked out or leave with no notice if their fixed-term tenancy is over.
The Residential Tenancies Amendment Act (RTAA) took effect from October last year and landlords organisations are urging members to do their homework as people begin to shift around in the new year.