[irishliz]

We are in the very fortunate position in that the same week my husband had his job offer we sold privately to somebody we knew who was desperate to buy on our road. No stress at all in process and a fair asking price and we have just exchanged so very very lucky. We needed to sell the house as rental income wouldn't cover the mortgage and I will not be working.

My worry is that my husband's job is initially for two years and if NZ suits us we would probably stay, but we know some people who have come back from NZ for different reasons but mainly for family. Should we buy a smaller property here 'just in case' - we have seen one we really like - or with the current market conditions should we take the money and run? I am worried that we will be priced out of our current area if we have no foothold at all. But buying here would mean we would have to sell here first if we decided to stay in NZ.

For background, we have 4 children and currently live in a reasonable area and while it is not ideal but it has good schools and we have good friends so unlikely if we did return we would move elsewhere in the UK. But who knows. We move out of our current house in September and plan to be in NZ October/November.

So I am not asking for you to make the decision for us but some opinions would inform our discussions.

Thank you.

[tigerlily]

How do you feel about living in a rental house for 2 years? If you need to buy to help you feel settled that would be a big factor in the decision. Also, can you afford to buy in NZ the type of house/ in the area you want? NZ rental prices are very low compared to the cost of buying there.

From a purely financial point of view- the NZ dollar is still high against it's history and there is some agreement that the housing market is inflated. That doesn't mean it's going to crash for sure, just that it may flatten out for a while yet.

Good luck with all your decisions.

[Belmont Babes]

We haven't sold our house yet but have had numerous decisions about this very topic. We are going to rent our house out if not sold and after the mortgage there will be a surplus to help out with rent in NZ. If we sell the house we do think we will buy a small flat here in the UK also. I don't know how we will feel not owning a house in NZ if we do the rent option but sometimes I feel that you have to make a decision as best you can and live with it.

[leachio]

Hi,

You are gonna get a mixed response from this 1 I think. People who did buy a 'maybe' house, people who never, people who luv NZ and people who dont. I personally would buy the house but thats cos Im havin a tough time here and wish now we had rented our old house instead of sellin cos now we cant afford to buy it back (and it was just an ex-council house). It will most likely boil down to finances and if you can afford to buy it and still live comfortably here then consider it.

Good luck in your decision making ;)

[irishliz]

Thanks for your replies - they certainly clarified a few points for us. We will try to buy a foothold in the time left on the basis we are in NZ for two years and if we decide to stay cross that bridge at the time.

Thanks again.:)

[willowshouse]

Ask yourself how you will feel if house prices in your road continue to rise as I presume they have over the last 2 years. Things are not expected to rise at the same rate here in NZ (well that's my take on it anyway!).

You could always see it as an astute financial decision rather than a 'hedging your bets' one. Personally, not selling our UK property has proved to be a very good financial decision, and we've only been here 9 months.

I know that some people feel the need to 'own' your home .. in an ideal world that would definitely be my choice too, however the short term inconvenience of not owning my home is more than compensated by the long term financial outcome for us as a family.

By the way, just so we have covered all bases - we have invested in rental property here in NZ .. so if the market does rise we won't lose out entirely.

Good luck with it all.

Dawn

[crispyking]

Personally, I think that a UK property will increase in value faster than a NZ property. You are also more likely to get a higher rate of return on renting a property in the UK than NZ providing you get a high occupancy rate (it's worth investigating housing associations as they can remove a lot of hassle with renting a property). If you can afford to, probably worth investing in UK rental property until you decide either way. :nice1

[Paul]

Looking at both housing markets prices I would seriously consider putting the lump sum on deposit and using interest to subsidise rent in NZ or leaving it to grow at say 5-6%. Do you think housing market in either country will grow by more than that over next few years? Not so sure personally

Best of luck

[crispyking]

easily, the UK housing market has consistently been above 10% -
http://www.guardian.co.uk/uklatest/story/0,,-6846268,00.html

the NZ market seems to be achieving the same -
http://nz.news.yahoo.com/070812/3/170r.html

there have always been doom merchants saying "it's going to crash!" and perhaps it may do - I have been waiting for years for this to happen in the UK (and it never has) :uhoh

[Paul]

easily, the UK housing market has consistently been above 10% -
http://www.guardian.co.uk/uklatest/story/0,,-6846268,00.html

the NZ market seems to be achieving the same -
http://nz.news.yahoo.com/070812/3/170r.html

there have always been doom merchants saying "it's going to crash!" and perhaps it may do - I have been waiting for years for this to happen in the UK (and it never has) :uhoh


Nothing to do with doom merchants its just the facts behind the current situation including rising interest rates and millions of people coming off artificially low fixed mortgage deals within next two years, This coupled with the ever increasing debt burden caused by overborrowing and increased prices of utilities etc is a time bomb waiting to explode I am afraid

The bit we all don't know is how big will it explode and when. Some of younger generation have been brought up in a period when house prices have only ever gone up in the UK - this is by no means guaranteed to be the case ongoing

All of a sudden a 6% "guaranteed return" doesn't look so bad and certainly should be considered as part of a decision process

[irishliz]

Paul - your comments mirror my husband's view exactly. We have made an offer and had it accepted but not sure if it the right thing to do. We have some hard thinking to do this weekend! I also don't want to mess the vendors around.

My issue is that having worked so hard to be in a good position, I don't want to return in two years and not be able to buy in this area - but then why are we moving at all! And would we actually want to return - not sure about that.

oh dear

[willowshouse]

Looking at both housing markets prices I would seriously consider putting the lump sum on deposit and using interest to subsidise rent in NZ or leaving it to grow at say 5-6%. Do you think housing market in either country will grow by more than that over next few years? Not so sure personally


Obviously if someone is concerned that the housing market is going to crash badly then that is certainly something to think long and hard about .. but it is not as simple as "will either the NZ or the UK housing market increase by more than 6%" as you have to take leverage and rental income into account (don't fall asleep yet!)

I have had to pick figures out of the air to use an an example ..

If your house in UK is worth £300,000, your mortgage is £220,000 and therefore your equity is £80,000. I will assume that the house will rent out for £1,200 pcm which is £14,300 per year

Cost of £220,000 mortgage at 6.5% - £14,300 per year interest only
Rental income - £14,400 per year..no tax to pay as off-set against mortgage
Therefore in very simply terms this property does not cost you anything.

Alternately, you sell this property (which will incidentally cost you estate agency and solicitor's fees that I have not taken into account) and you take your £80,000 to NZ where you get probably 8% for it .. £6,400 a year which you will have to pay tax on at 34% .. leaving you £4,244 a year

Now let's compare the two scenarios .. the UK property would only have to increase by 1.4% in the first year to equal the earnings of your nest-egg gaining interest in a NZ bank account .. so really in this particular case the question is not will the value of my house rise more by more than 5-6% .. but rather 1.4%

Anyone considering this situation needs to look at their own individual situation .. equity, house value, rental value .. and then make their decision.

One more thing to bear in mind .. if you decide to sell your property in the UK after a while the capital gain will be tax-free as long as you do not return to the UK to live for 5 years after that. In the meantime if you want to release any equity you can remortgage.

And another thing ... the rental value should increase year on year making you a profit above and beyond the equity increase.

Now .. anyone considering the sell/rent issue - go and get a calculator and play around with the figures, you might be able to take out a large proportion of your equity as cash by remortaging and still be able to keep the property.

Dawn

[Helsandfamily]

Wow Dawn what a thorough reply - Thanks. It has given me food for thought although I may have to read it a couple of times to digest it all !!

Thanks

Hels

[Paul]

Also factor in any void rental periods, lease agreements, agents fees, repairs and maintenence and also when the tenants leave the making good of any damage or general wear and tear (and the risk of total refurbishment if you have nightmare tenants as my friends did when they toured the world for a year)

Also something Dawn mentioned should be considered which is switching to an interest only mortgage which is the fact that you are never actually buying the house whilst paying that, you are simply renting it from the bank as you are not repaying capital and paying off a debt. I know interest only ahs become fashionable over recent years (mainly because of buy to lets and unaffordability of traditional repayment mortgages) but the facts behind it need to be remembered seriously especially if a house price crash is possible

Also put your money off shore/in UK and earn roughly 6% tax free (4 year exemption for NZ tax no?)

I woould think the true growth figure you need to look at is somewhere between 1.4 and 6%

Factor all this into dealing with this from 12000 miles away whilst dealing with creating your new life in NZ and I would agree you need to consider it carefully.
Sometimes the figures don't tell the full story and the issue of having an "easy out" if things don't go according to plan can be a good or bad thing depending on how you look at it (may contribute to you not making a good go of it in NZ for instance)

Best of luck with your decision and remember peoples opinions are only advisory and everyone has different risk preferences

Paul

[willowshouse]

Best of luck with your decision and remember peoples opinions are only advisory and everyone has different risk preferences


Well, yes .. that's obviously right .. my perspective is from that of owning successful rental properties in the UK without the need for a rental manager (so no fees) or indeed any rental void periods and several sets of good long term tenants who don't damage my property .. yours is not the same. It's funny, the 12,000 miles thing makes not a scrap of difference to us/our investments .. it could be seen as a daunting figure when somebody mentions it, but that's about it.

I have to comment on your perspective on interest only mortgages .. yes, you are not paying off the capital - so what? Presumably if you enter into an investment mortgage you have already decided to take the risk that property prices will go up, so whether you contribute even more of your money to pay off the capital as a kind of savings plan - or you just sit back and wait for the equity to build up .. what difference? There is no more risk involved .. an investment property is almost certainly going to be sold at some stage and at that point the principal sum gets paid off.

Someone who is making this decision needs to look at actual financial truths rather than just gloss over the surface .. if they then decide to sell up just because they want to, then fair play to them .. they made their minds up based on the facts. That was the reason for my post.

Dawn

[Paul]

Well, yes .. that's obviously right .. my perspective is from that of owning successful rental properties in the UK without the need for a rental manager (so no fees) or indeed any rental void periods and several sets of good long term tenants who don't damage my property .. yours is not the same. It's funny, the 12,000 miles thing makes not a scrap of difference to us/our investments .. it could be seen as a daunting figure when somebody mentions it, but that's about it.

Absolutely there is a certain luck of the draw in rental properties and you have inded been fortunate to not have voids or bad tenants (coupled with good research and knowledge as well of course!). Bottom line there is a risk

I have to comment on your perspective on interest only mortgages .. yes, you are not paying off the capital - so what? Presumably if you enter into an investment mortgage you have already decided to take the risk that property prices will go up, so whether you contribute even more of your money to pay off the capital as a kind of savings plan - or you just sit back and wait for the equity to build up .. what difference? There is no more risk involved .. an investment property is almost certainly going to be sold at some stage and at that point the principal sum gets paid off.

Point being we are in a period where a house price stagnation and/or possible drop is very likely - think most property "experts" would agree with that - so the interest only discussion is very relevant especially when we are talking about playing with the family home effectively here. I don't believe the OP implied that they were property investors just looking to keep a foothold and presumably at least maintain their existing equity

Someone who is making this decision needs to look at actual financial truths rather than just gloss over the surface .. if they then decide to sell up just because they want to, then fair play to them .. they made their minds up based on the facts. That was the reason for my post.

Agreed and "facts" shouldn't be confused with informed opinions
Hopefully the Op now has enough information and opinions to decide this weekend what they want to do

Regards

[willowshouse]

Agreed and "facts" shouldn't be confused with informed opinions


You do seem very determined to have the last word Paul ..

Now call me Mrs Picky but are you trying to imply something with that statement? How can you confuse a financial fact (like the value of your house or the total amount of your mortgage) with that of an informed opinion? All I'm saying is .. look at your own finances and all of the possibilities open to you... your original post gave what I considered to be a false impression and that is why I posted. Forgive me if I seem testy, but you seem to want to undermine what I have to say and whilst we are all entitled to our opinions I don't think it's quite necessary in this case.

Dawn

[Paul]

You do seem very determined to have the last word Paul ..

Now call me Mrs Picky but are you trying to imply something with that statement? How can you confuse a financial fact (like the value of your house or the total amount of your mortgage) with that of an informed opinion? All I'm saying is .. look at your own finances and all of the possibilities open to you... your original post gave what I considered to be a false impression and that is why I posted. Forgive me if I seem testy, but you seem to want to undermine what I have to say and whilst we are all entitled to our opinions I don't think it's quite necessary in this case.

Dawn

Not trying to Dawn but if questions keep getting asked.....

Anyway my last post on the matter so feel free to dive in with the final word afterwards or pm me of course!

No one is confusing financial facts as you suggest as to values of homes and mortgages - as you say they are what they are, but not really relevant to the overall advice. The figures you made up to illustrate your example seems pretty OK ie £1200 month mortgage etc.
Nor am I disputing your historical facts that you have done well out of rental property and had good tenants etc

The point, in my opinion, being missed here is that the original poster asked about buying (not keeping) a foothold in the UK for two years whilst they decided if NZ was for them.
With the entry costs (stamp duty, legals etc) and the potential for short term stagnation and even falls in the current market (and obviously some potential for some growth to be a balanced view) then it needs to be considered carefully when they could curremtly get a reasonably good return (possibly tax free) by putting money in a bank, that was the main point I was trying to make

Shame you've taken it personally, my opinion is no more or less valid than yours and was not trying to imply otherwise

Best of luck to IrishLiz with your decision

[irishliz]

Thanks to everybody for your comments. Just to clarify some points - we have actually sold our home as we have a good offer. We hadn't intended to but somebody we knew wanted to buy so as it fitted in with 2 years in nz - exchanged this week. In fact once we did the sums we couldn't have kept on the house as the mortgage payments and upkeep would not have been covered by the rental income and our house not really suitable for rental market in any case.

So we have decided to take the plunge and have had an offer accepted on a much smaller house almost covered by our equity and ideal for renting. There are excellent letting agents in our area (highly recommended by two families who used them) and it is a popular area. We also feel that as the house is smaller we should be able to sell it quickly if we need to particularly as it is in the catchment for two excellent primaries.

But our decision ultimately came down to me wanting an anchor while we explore life in NZ staying on the property ladder not for investment purposes but to maintain that foothold. And I know this area much better than Wellington and felt we could deal with any issues while we were away.

Saying that still at the very early stage and not visiting any other houses so if this one falls through for any reason, then we will bank the money.

We are on holidays for two weeks in sunny Ireland visiting family but I will keep you posted.

Thanks again.

[oakey1]

Myself and my wife michaela have been talking about this topic are selfs and we have decided to rent are house,because we feel if we decided to come back to the Uk we would have no chance in purchasing the same property again,also its still a good investment for the future.

Regards Oakey1

[Paul]

For those who have decided to keep a foot in the UK market a point worth mentioning here relevant to those renting out houses, is that you may be better raising/keeping a small mortgage on the rental property here and using that money in NZ as the mortgage rates are much lower in the UK. You will also probably get tax relief on the mortgage interest if you are making a profit here in the UK (assuming you end up paying tax on your UK rental of course)