Well-known economist Tony Alexander has a word that he has been brandishing around often recently. That word is ‘FOMO’ or fear of missing out. Now, that concept isn’t just something invented by those high up in the financial world, it is a very real phenomenon. One that can seriously affect the decision of first home buyers.
Since the start of the year, prospective home buyers have been looking forward to getting on the property ladder once the bubble had burst. They were putting off buying a house back then. That decision would have cost them no doubt, but it will cost them even more if they don’t act promptly.
The fact is that if you are ready to buy a house at this very moment then do it! There is ‘no time like the present’ they say. This is definitely a time to heed those words when it comes to buying your first home.
The three factors listed below are making it imperative for first home buyers to enter the market now:
House prices keep going up
The only way is up for house prices and that phenomenon isn’t limited to Auckland anymore. That statement is true all across the country! House prices are going up everywhere and rapidly, due in part to the current economic situation. Not just that, the aftermath of COVID is also having an effect on it. Could this be the beginning of a new property boom in Auckland? A boom that would see house prices continuing to go up for the next five to six years. Such a situation seems unlikely for the rest of the nation, but it could still be a year before prices start to cool.
Upcoming competition in the market
Interest rates are the lowest they have ever been, and they are set to keep decreasing. What’s better is that these changes are here to stay at least for the foreseeable future. However, don’t wait for those to lower because there will soon be around $1 billion of extra funds available to New Zealanders, some of which is sure to go into housing. The reason behind this sudden surge in available funds is because $203 billion worth of current mortgage lending is set to be reviewed and repriced. Even if the new rate is just half a percent lower, that will allow for available funds worth $1 billion.
The LVR cloud is looming
Currently, the Loan to Value Ratio has dropped meaning that home buyers no longer require a minimum 20% deposit to secure their home. The figure that most first home buyers are paying is far lower than that. However, the governor of the Reserve Bank has talked about the prospect of resurrecting the previous figure. This is down to heavy investor activity and rapidly climbing property prices. If such a thing were to happen, then many first home buyers would have to inevitably postpone their decision to a later date.
These are the main factors that first home buyers need to consider before getting on the property ladder.