Buy Your First Home Now! Really?
Yes really! But unlike the politicians of all persuasions who recently promised 100,000 new homes in the next ten years, and have more recently had to acknowledge it’s going to take them three years (maybe longer) to get the building industry cranked up, the reasons for this considered opinion are included.
1. The LVR restrictions are simply a beaver built dam across the continuing demand flow of new households. Folk like you are still saving and still looking at ways of putting together the high deposit figure required. More and more of you are about to qualify for that loan. And any easing of these loan restrictions is going to both gradual and timed to match an increased supply of ‘affordable homes.’
2. Our newly formed government has been very clear that: it will tighten tenancy regulations in favour of tenants; and change the investors’ bright line ownership test from two years to ten years; and that the facility to transfer rental property losses to another income stream will be eliminated. Therefore Mr and Mrs whoever who have negatively geared their investment purchases, making them a loss activity, will be under increasing financial pressure. The probability is that more existing homes will become available for you to buy. The crunch time may well be 31 March 2018.
3. Our government is also going to progressively raise minimum wage levels. And while that may be good news indeed for most folk it is not good news for the construction industry. Wages are under pressure already. This industry has already stated that it needs 20,000 skilled tradesmen. As wages go up so do building costs and inevitably prices.
4. The building supplies companies facing an almost doubling in materials demand within three years have work out how they are going balance domestic demand and existing export contracts. Is an increase in materials cost likely? In my opinion, inevitably, and with those increases further ‘starter home’ price increases. The ‘affordable home’ price of $600,000 for Auckland looks like a target that will easily be missed.
5. Apart from the uncertainties inevitably created by an entirely new government, a government which in November’s political horse trading has had to compromise on its electoral promises there are global uncertainties way beyond the control and indeed the capacity to influence of most if not all global institutions. These uncertainties coupled with the fluctuating domestic house prices evidenced over the past 8 months have made financial institutions more cautious lenders.
6. The days of large sections and stand-alone homes are on a historic horizon. The affordable homes of the future, at least in the boundaries of Auckland are going to be ‘terrace housing’ or slightly fancier versions of the 1950s and 1960s 70 to 90 sqm metre homes but now built on pocket handkerchiefs rather than ¼ acre allotments.
7. The homes investors are moving on may be your best option.
It is the season for many things: Christmas, friends and family, beaches, and holidays. Could it also be the time to firm up your purchase plans. Waiting for the May 2018 budget is likely to be a bit late.
By the way, I consider the time line ‘now’ is any time in the next 12 to 18 months. But start today.
