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It makes one despair when an article such as the one below appears. Renting has always been cheaper than owning for as long as I have been in the business, and well before then too.
How come an expert such as Dominck Stephens of Westpac has only just woken up to the fact?
Higher interest rates may well make renting even more attractive than before, but that is on the single view point of money in versus money out .
“Renting or buying is roughly in balance (now),” he says.
Owing your own home is still the dream of most people, but so is Lotto and the Casino.
I reproduce the article only to demonstrate that the bleeding obvious is still lost on many who are supposed to be knowledgable in these matters
Mortgage rate rises favour renting vs buying
As interest rates continue to rise, house prices may fall in the next couple of years, according to a report by Westpac Bank.
And as interest rates rise, the picture will tip in favour of renting, rather than buying, Westpac says.
“Renting or buying is roughly in balance (now),” Westpac chief economist Dominick Stephens said.
Last year when interest rates were low, it was seen as much better to buy a home than rent.
“When mortgage rates have gone up another 1 per cent or so, the decision may well favour renting,” Stephens said.
Asked if it was better to hold off buying now when house prices might fall, he said “I’d be cautious”. Because interest rates were likely to rise and it would be a good idea to fix borrowing costs, but there were still opportunities to invest in property.
Floating mortgage rates are heading towards 8 per cent and fixed term rates to about 7 per cent and may stay up for an extended period as the Reserve Bank tries to tame inflation, especially in the construction sector.
I find this story hard to believe.
There may be a few rogue landlords or managers around but they would be totally out numbered by the number rogue tenants. The quicker the Residential Tenancy Act is overhauled to reflect true fairness – or better still abolished all together – the sooner we will have a mature and civilised rental market
Rental agents ‘milking’ tenants
Rental agents in Christchurch’s tight housing market are “milking” vulnerable tenants by charging them to renew their lease, social agencies say.
The practice has been labelled “contentious” and welfare organisations want it banned.
Selina, who did not want her last name used, had been living in her home for more than a year when the lease came up for renewal. This year, however, it came with a price tag: $450 in “letting fees”.
“I couldn’t believe it,” Selina said.
“$450 just for signing a piece of paper? This is taking food out my kids’ mouths.”
Selina’s rent had increased $50 in the last year.
A single mother with four children, she has a fixed income and said riding out the rent increases was “hard enough”.
When the unexpected bill hit she was afraid of losing her home.
Her rental agent would not back down.
With the help of the Mayor’s Welfare Fund, Selina could eventually cover the cost. However, she was already terrified of her next renewal.
“I’m worried I’m gonna be in the same boat next year,” she said.
Letting fees were designed for agents to cover the cost of setting up a new tenancy.
In Christchurch, tenants simply renewing leases are being faced with bills of up to $1000.
By law, letting fees must be a fair and reasonable representation of the cost of re-leasing a home.
There is no cap on the amount charged, but common practice is one week’s rent plus GST.
One rental agent, who wished to remain anonymous, said tenants should not pay renewal fees.
“There’s no admin involved in renewing a tenancy except changing the date in the system,” the agent said.
Tenant’s Protection Agency manager Helen Gatonyi said tenants could approach the tenancy tribunal about renewal fees, but many were afraid of losing their homes if they spoke up.
House sales continue slide
House sales in June continued to drag their heels, although the national median price was supported by housing-short Auckland and Christchurch.
Figures from the Real Estate Institute of New Zealand showed the number of house sales fell 6.1 per cent in the year to June and 12.3 per cent on the previous month.
Houses were taking 39 days to sell, five days longer than a year ago.
But the national house price continued to defy gravity at $427,250, virtually flat against May but up 8.4 per cent on a year ago.
Asking price of homes remained at record levels during May
June 13th, 2014 |
The average asking price of homes remains at record levels, not only in Auckland but across the country.
The national average asking price of house sellers in May was $483,524, only marginally below the all time record set in March of $484,263. In Auckland, the average asking price was $685,246, practically the same as the new record set in April of $685,426. In Wellington the average asking price in May was $453,850, while Canterbury came to $442,784.
Despite the strong prices sought by sellers, there are still plenty of Kiwis looking for homes to buy throughout the country. Traffic to Realestate.co.nz has risen 50% over the last 12 months, showing that buyer interest hasn’t dissipated. And traffic from mobile devices specifically, including smartphones and tablets, has grown by 90% in the last year.
Is now a good time to buy property in Auckland?
Jul 8, 2014
Four experts give their views
Is it a bad idea to buy a property in Auckland?
Property prices in Auckland are continuing to rise despite lending restrictions and higher interest rates pushing up the cost of borrowing.
Figures released yesterday by QV show the Auckland market increased 12.3 per cent year on year and values are up 31.4 per cent since 2007 peak.
NZ Herald.co.nz talked to four experts about the issue...
Property consultant Olly Newland says renting is cheaper than owning at the moment but renting has its own pitfalls.
"I agree that renting is cheaper than owning at the moment but you are always at the mercy of the landlord."
Newland says buying a house gives the home-owner access to potential capital growth and at the same time they are paying off a mortgage.
"Interest rates are still historically low. Prices have gone up crazily in some areas but not everywhere."
Newland says while certain areas in Auckland have skyrocketed in price if you go south there is still options for under $450,000 in Clevedon or Takanini.
He predicted higher house prices in central Auckland would drive the gentrification of outer neighbourhoods like Panmure and Glen Innes.
Newland also warned that rents were likely to rise with landlords expected to pass on increased interest rate costs.
Read the whole article here:
Guaranteeing a mortgage for others, family or not, can be fraught with danger. Anyone considering that should get sound financial advice before signing on the dotted line.
Some of the points to consider:
(1) Is the guarantee for a fixed period or for the term of the loan?
(2) Is the guarantee for a fixed amount or all encompassing?
(3) At what point will the guarantee be allowed to lapse?
(4) Is the guarantee joint or several?
If you don’t know or what to find out more contact us for advice.
First-home buyers use parents as guarantors
Twice as many Wellington first-home buyers are using parents as guarantors for mortgages since a tougher deposit criterion was introduced last October, according to a Wellington mortgage broker. \
The latest monthly property values, issued yesterday, highlighted major challenges for the capital's first-home buyers because few city properties had a price tag under $400,000.
That put many homes beyond their reach thanks to the 20 per cent deposit cap imposed by the Reserve Bank last October.
"We are seeing some first-home buyers finding ways around the caps, for instance by getting parental guarantees," QV Wellington registered valuer Kerry Buckeridge said.
Wellington mortgage broker Craig Pope agreed, saying first-home buyers were forced to be "creative" about meeting bank criteria to get a mortgage.
About one in 10 of his clients used family as guarantors for their mortgages, double the number relying on that help before the Reserve Bank introduced the tougher loan-to-value ratios.
However, he believed the biggest change had been increasing numbers of people using KiwiSaver to augment their deposit - about 60 per cent.
"That has been a massive help for home buyers. As time goes on, more people fit the criteria and can use KiwiSaver to buy a house."
KiwiSaver had two features to assist people buying their first home, including its deposit subsidy and savings withdrawal schemes. Under the deposit subsidy, people could withdraw up to $5000 if they had been in KiwiSaver for more than three years.
Statistics from Housing New Zealand, which managed the subsidy scheme, showed its payouts to first-home buyers had increased exponentially during the past three years.
Read the rest here:
Property values still rising in Auckland while nationwide picture is mixed
07 July 2014
The latest monthly QV Residential Price Movement Index shows that nationwide residential property values for June have increased 8.0% over the past year, and 2.1% over the past three months. This means they are now 15.0% above the previous market peak of late 2007. When adjusted for inflation the nationwide annual increase drops slightly to 6.3% and values remain below the 2007 peak by 1.3%.
The Auckland market has increased 12.3% year on year and values are up 31.4% since 2007. When adjusted for inflation values are up 10.6% over the past year and are 12.8% above the 2007 peak.
Read the rest here:
House prices hit record highs in Auckland and Christchurch last month. Still upward price pressure in Auckland
July 4, 2014
House prices hit all time highs in its northern region (Auckland and Northland) and Christchurch last month, according to New Zealand's largest real estate agency.
Harcourts said the average price of homes it sold in the northern region in June was $720,815, compared with the previous record high of $697,454 set in May, while the average price of homes it sold in Christchurch was $529,09, setting new price records in both cities. Harcourts didn't supply median prices.
And Auckland prices may have some way to go yet.
Harcourts chief executive Hayden Duncan said there was still strong upward pressure on prices in Auckland.
Read the rest here:
Landlords say low taxes cap rents
Nearly $500 million in tax was paid on rental incomes in the financial year ended March 2013, figures obtained under the Official Information Act show.
The New Zealand Property Investors Federation (NZPIF) requested the information in response to the Tax Working Group’s finding in 2009 that rental property owners took money out of the tax system rather than paying into it.
It found that rental property owners last year collected about $1.5 billion in revenue, of which about $500m went to Inland Revenue in tax.
The federation said “only Inland Revenue data from 2008 was used to back their claim” – a year in which high interest rates saw most property owners lose money.
The federation said that based on the Tax Working Group’s claims, the Government withdrew the ability of rental property owners to claim depreciation.
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