Property prices are on the rise in the capital, but what does this mean for new home buyers? Brendon Ojala investigates.
Right now I'm feeling for all the first home buyers (and actually all the second home buyers) in Wellington. And yes, I can hear those tears also pattering in to the lattes from those a little further north, too. I’m also feeling for those who are wanting to get started on the investment property ladder.
However, taking away the sentimentality, in short, Wellington is a sellers' market right now. It's tough if ou're a first home buyer because there are simply more buyers than sellers in the market.
One of the biggest challenges for first home buyers is that often they have less than 20 per cent deposit. This means that for most banks they will require a valuation before they will approve finance unconditionally.
In a situation where houses are sold via negotiation this isn't such a major issue, as it is generally possible to add valuation as a condition. However, where most houses are being sold by tenders, deadline marketing or auctions, this becomes really challenging for first time buyers given they will be competing with lots of others who are making unconditional cash offers.
If a first home buyer wants to buy at auction and they have a small deposit then there is no option but to get a valuation prior. (I guess they could take the risk by buying the place and hope they can get a satisfactory valuation after auction.)
At a tender or deadline sale there is a decision to be made: spend the money on the valuation (as well as the builders report, etc) and have a cash offer OR make the offer conditional (understanding that is is clear to the seller which is the more attractive offer--which can be a little demoralising when you miss out on your dream homes several times).
It's also tough for people who wanting to upgrade their property. There are big decisions to be made:
- “Do we sell our existing house, so we're in a stronger position to buy again?” (The challenge here is if one can't find a new property quickly they may be priced out of the market) OR
- “Do we put offers on property conditional to selling our current house?" (As mentioned above, conditional offers aren't ideal) OR
- “Do we work to secure some form of bridging finance?” The latter is a topic for a whole new blog, but certainly where we as mortgage advisers can assist. And in general, a mortgage adviser in a property market like this is a wonderful asset to have on your side. So give us a bell with any questions you might have about getting on to this fast moving Wellington property ladder.
Brendon Ojala is a Registered Financial Adviser with Velocity Financial. No investment decision should be aken based on the information in this blog alone. A disclosure statement is available free of charge upon request.