If people get finance, why have they to buy a property now and why is buying for financial reasons with high debts a risk? What are the essentials for a higher success rate, confidence and motivation?
NZ’s Housing Market
Why are Homeowners house rich, cash poor?
Housing fills the headlines for years
Ongoing for years the shortage of housing and skyrocketing house prices have changed the way people think about home ownership. If people get finance, they intend to buy NOW before further price hikes happen. Especially first-time buyers feel the pressure rather buying today than missing out on long-term.
For years housing is the play ground for politicians and in coming election year again object for attracting voters. In contrast councils charge a fortune for the land and banks cannot feel better about the steady increasing home loan numbers. Under these circumstances purchasing a house for financial reasons with high debts is risky. To avoid slavery to the bank a sufficient deposit is a must. For first-time homeowners it is just the beginning of a series of home related hurdles.
High debts, house rich, cash poor
People who purchased a residential property with too much debts risk significant interest payments and the likelihood to fail, when interest rates go up. It would result in total liability payments (interests, levies, repairs), which may outperform your income and capital gains. Reducing debts must be a consideration as we have seen people who lost everything under similar circumstances during the financial crisis after 2007.
The released statistics by NZ’s Century of Censuses report show the percentage of home ownership dropped in recent years, however the numbers are still higher than in most developed countries. The international trends reveal not only a widening gap between income and price but also demographic and lifestyle changes. Despite this the Kiwi dream of homeownership is still alive for family and happiness.
New Zealanders are “house rich but cash poor” and struggling with increasing housing costs to stay on float because of the dated housing stock and poor state of maintenance. Nobody talks about the impact of high inflation (rising costs) for home owners. As result all payments for other kind of taxes are going up, but people are fixated on capital gains.
Babyboomer vs. Millenials
Another hot topic is the discussion Babyboomer vs. Millenials. Without looking at details the workforce is comprised by more young workers, which are increasingly mobile. Therefore Millennials have the lowest homeownership rate of any generation. These people have to find a good paid job and also carry student loans, hire-purchase and other instalments due for getting married, having kids and starting a family. Career and mobility become increasingly important, why would you limit your options bound to a mortgage?
The baby boomers are the first generation who worked through many major changes of political structures and societies. That resulted at the end of their working lives that baby boomers are better off and have less debt than younger generations which just starting out. Millenials now seem to expect as of right the same standard of living as their parents ended up with. Baby boomers struggled on single income in hard times and survived, millenials will manage career and financial stress, why would you believe that started out was easier in the past?
The logical approach
In the nutshell home buyers nowadays have to make informed decisions (about market value, asking price, offers, buying process and negotiation). The Homeowner’s blog tries exactly that helping you to be prepared;
· Knowledge about finance, interest rates, mortgage pre-approvals and taxation, especially the impact of inflation.
There will never be the perfect time to purchase a home because of constant changes of policies, housing market and personal circumstances. However essential is being prepared that accelerates success rates, confidence and motivation. The homeowner’s blog will help you to manage your position.
Klauster Properties Ltd. - Homeowner's Blog
Homeowner’s joy and misery
Klauster Blogs lead to a real person, IT professional, investor, landlord and business owner with interests in technologies, residential properties and healthy lifestyles.
The passion of making experiences available comes from renting in different countries and working with people who are interested in home ownership. Helping people to avoid pitfalls has been most rewarding, when forming relationships.
Our philosophy to treat life, partnerships and hobbies as an investment has helped people in our circle. Life is a dream with a deadline, happiness comes from making the right choices by having realistic expectations.
Come along and participate — boost your confidence!