[batgirl1001]

What are the interest rates like for home loans in NZ? I checked on websites and it seems the rates are from 8.5-10%. This for me is unbelievably high since basically if you take a home loan for say 15-20 years, you are paying more for the interest than the value of the house.

So for those who have just moved to NZ, do you decide to rent or buy a house as soon as you get there? What are the pros and cons of doing so?

I just got residency so of course I wanna move to NZ and buy a house and start my new life right way. But I don't want to get into heavy debt (having just got debt-free) for too long and it seems like buying a house in NZ is not a good move.

Can someone help and enlighten me on the housing situation in NZ? Thanks.

[Nick88]

Martin Hawes wrote in his Herald article

Property values got so out of line with the rent that could be collected on them, and renting is the bargain of the decade at the moment. You get a lot more property for each dollar by renting than you do by owning and paying interest.

Here is the full thing

http://www.nzherald.co.nz/section/3/story.cfm?c_id=3&objectid=10516364

To be honest you are probably better off waiting for a bit, especially in the cities where people tend to be more mobile, and the turnover of properties is higher. Unless you really have to buy, I'd sit on the deposit and see what happens.

[JandM]

Hello, and welcome to the forum.:)

[Red Devil]

We're not in NZ yet, but when we do arrive we'll be going down the route of renting for 1, maybe 2 years tops and then assessing the situation.

It would appear that property prices globally are reducing and there's general uncertainty in the housing market. Based on this, we're going to play the percentages and keep our hard earned equity of the past 14 years placed in a nice piggy bank earning some nice interest and see what develops with the housing market in NZ :D

Having said that, if the housing market was buoyant in NZ and we saw the right property in the right location, location, location then we'd be tempted at buying during our 2 year trial period... but times are changing and it's wise to view things in a different light :roll

[CJ22]

Likewise, we plan to rent for at least a couple of years. Partly because we will have to save a deposit, but mainly because now would be a mad time to buy. Even if forecasts of value reductions are overblown, the last thing you need is to be in negative equity in a place where you don't know if you'll stay. We'll rent, and hopefully pick up a bargain in 2 or 3 years.

[nippa&pippa]

We decided to rent for a year then buying house but our children and my OH wasn't happy at the rental house at all, doesn't feel settle and then found that we have a baby on the way forced us to change the plan sooner than we expected. So we went out and start looking for house before we brought house 7 months after we arrived (few months before our son born at our home)
Our kids and my OH was settle straight away on the first night we moved into our house, they were lots happier and more relax (and that point my OH decide he doesn't want to go to UK:roll :D)

[batgirl1001]

:D

Just read the article and a couple of others I googled after that in which basically they are saying the same thing.....house prices are holding for now but buyers are just adopting a wait-and-see attitude to see if prices will go down. Property analysts (if they can be believed) seem to think that the market is heading south.

I can't believe the market forces have created such a distortion in the property sector where people are holding on and paying for assets which are decreasing in value over time.

:uhoh

I suppose I can wait off and rent in the short term to see if the market will fall since I got some reserves. Prudently that would be the best move.

But emotionally it feels like you are not laying down any roots because I think renting is basically like squatting. You just don't feel settled and becoming a part of NZ. I think there is a greater tendency for you to leave if you don't start the settling down process soon and that would defeat the purpose of moving to NZ in the first place.

I guess I can hope things will improve by the next year or so.

[SharpBlade]

I agree with Sophia (nippa), it is ok to rent for a while but we found most rentals are not that nice, some damn right awful and it is depressing to live in a cold, beige, sixties sort of house, with minimum garden space and wishy washy furniture. I am not a big consumer, but we like to feel at home and that's why we bought a house in 2006 (10 months after renting). We have children and it was important to have that homely feeling.
But if it was just my husband and I, we could have stayed in rental a lot longer.
Good luck with yoru decisions,
Laura

[JandM]

Renting is basically like squatting (and the rest of that para)? Batgirl, I realize you're speaking for your own feelings here, but that's a bit of a sweeping statement. There are big sections of the population in NZ and the UK (even bigger ones in e.g. many European countries) who live their whole lives, and make their homes, in rented accommodation. Not that I'd want to, but still...

[James 1077]

Not all rentals are that bad! We've got a really nice one which there is no way we could afford to buy but can afford to rent.

The previous occupants were in it for 5 years and we're planning on doing something similar unless prices really come down / the perfect place comes on the market.

I've got no issues with renting - most people in the world do it!

[incredible hulse]

I wanted to rent but had to give up on that idea as we were unable to find anywhere even half decent that would take a dog.

We also arrived over 2 years ago so have been lucky to get some increase in the property price.

[Chiba]

The maths on renting, in Wellington at least:

Hypothetical house costing $750,000, a reasonable commute away. You can *maybe* rent it for $500 per week. Your $500 could instead service a $250,000 mortgage over 30 years, assuming the first 5 years are fixed (ASB).

So, if you've got half a million in cash as a deposit, and want to be in debt for 30 years, then no worries. Otherwise you'll be living in a worse house.

Might as well rent for a while.

[mgbridges]

I'd definitely say rent for a while first! OH had to find us a rental on his own (I was still in the UK) and as I've said before elsewhere - he got it wrong. I really wasn't happy and ended up very, very focussed on buying something.

We bought & moved into our home 3 mths to the day of landing and in hindsight we rather bought in haste. I should have been much more open to the idea of moving rental to give us time to really suss out the market, what sort of house we wanted, how important the aspect of a house is, what things to look for when doing viewings, a budget, a realistic idea of what size of mortgage we could comfortably afford etc.

Now don't get me wrong I viewed close to 30 properties over a 3/4 wk period so we did a fair amount of research. We have also ended up in a lovely home but... we have a higher mortgage than I'd like, we've discovered it gets cold in the winter months and it doesn't have a child friendly garden (yet).

I'm rambling (sorry), basically be open to renting its very, very common in NZ and with the right attitude you should be able to make almost any house a home.

HTH
Anneliese

[incredible hulse]

The maths on renting, in Wellington at least:

Hypothetical house costing $750,000, a reasonable commute away. You can *maybe* rent it for $500 per week. Your $500 could instead service a $250,000 mortgage over 30 years, assuming the first 5 years are fixed (ASB).

So, if you've got half a million in cash as a deposit, and want to be in debt for 30 years, then no worries. Otherwise you'll be living in a worse house.

Might as well rent for a while.

Or looking another way in 5 years time you may have a house worth 900k(assuming modest year on year growth by historic standards and only have say a 220k mortgage left; that 500k pot has grown to 680k whilst the renter is further away than ever from getting on the wagon. Personally can't see the benefit of renting more than a couple of years to be honest and certainly up in Kapiti the prices aren't bombing the way the realtor fed media are trying to portray.

[benhila]

The maths on renting, in Wellington at least:

Hypothetical house costing $750,000, a reasonable commute away.

Surely you can spend less then $750K for a house in a reasonable commuting distance from Wellington CBD?

[IanW99]

Surely you can spend less then $750K for a house in a reasonable commuting distance from Wellington CBD?

Of course you can.

I believe that the point is that for a $500 per week rent you can live in a house worth $750K. You can of course buy a much cheaper house than this and also rent for less than this.

Ian

[Milliemoo]

Or looking another way in 5 years time you may have a house worth 900k(assuming modest year on year growth by historic standards and only have say a 220k mortgage left; that 500k pot has grown to 680k whilst the renter is further away than ever from getting on the wagon. Personally can't see the benefit of renting more than a couple of years to be honest and certainly up in Kapiti the prices aren't bombing the way the realtor fed media are trying to portray.

Well that's certainly one way at looking at it. :exit

I'd completely disagree with you though. IMHO Anyone buying a property now, or for that matter who has bought in the last 2 years, will see the equity in their property decrease and then level of in the next 5 years (if your lucky). This shouldn't concern anyone that's bought property for the long term though. If you choose to sell and buy something else, the house you will buy will also have decreased in value. It should only be of concern to people who have overstretched themselves and find they can't pay the mortgage and are forced to sell. If they've taken a 90-100% mortgage they could find they still owe the bank money after the property has sold. Or people that perhaps are selling up to move country and again might find they actually owe the bank more than what the properties worth.

There's a stat out there that goes along the lines that 'property doubles in value every 8 years' or something like that. That may be true in the very long term when it's all averaged out, but what some people that are new to buying property don't realise is that their are peaks and troughs. In fairness, most young buyers of today will have only experienced the huge boom in values, so I appreciate that for some in can be hard to accept that values can (and always will) take a plunge at some stage of the cycle.

If you're cashed up with a nice deposit for a home and are coming to NZ in the next 12 months, it makes financial sense to rent. Here's where it gets tricky. Things like emotions get involved and heaven forbid...hormones! and just go mess things up. Everyone's different and for some, the emotional benefits of owning their own home far out way and negative financial aspects.

People will do what's right for them, and so they should :nice1 Just don't be expecting to make any profit from the property market in the short term.

Milliemoo

* cue Tia to put me straight! LOL *

[buzztalks]

For us it was the exchange rate going south that prompted a decision to move from buy to rent. We landed last August with the Kiwi hitting a 22 year high against sterling. With hindsight, I'm glad that we did. I spent a good 5 months looking for a 'decent' rental south or east of Wellington City. The quality of the rentals is patchy to say the least.
The professionalism of the property management companies can also fit into this bracket.

[Chiba]

Of course you can.

I believe that the point is that for a $500 per week rent you can live in a house worth $750K. You can of course buy a much cheaper house than this and also rent for less than this.

Ian

...and of course you can stick your half million deposit into a savings account and earn 8%, which will be around $470 per week in interest even after tax at 39%, which reduces your rent to $30 per week. :)

...or bank it off shore and earn $625 a week while not paying tax at all. :yes

Just rough numbers, but do you still want to buy?

[benhila]

but do you still want to buy?

YES! But then it is probably my hormones talking....

[benhila]

Now say we have a different scenario. You buy a 500K house in reasonable commuting distance from Wellington CBD. You pay for it by cash and do not take a mortgage. Yes, you do not earn (at 6% gross offshore) $577 per week which you could have used for rent but then, the house is yours, you do not pay rent. And assuming that you are buying for the long term and expect the market to come full circle in a while, you enjoy your own lovely home and will also make some capital gain in the long run. I don't know about you, it works for me....

[Milliemoo]

If I was a cash buyer, in for the long term, then I'm sure I'd buy a place right now. Sure the value of the property dips in the short term, but you're mortgage free and have your own home...sweet :nice1

Now, where did I put that lottery ticket :D

Milliemoo

[Chiba]

You buy a 500K house in reasonable commuting distance from Wellington CBD. You pay for it by cash... ...you enjoy your own lovely home...

In this area 500k will buy you a 2 bedroom place on a tiny wee section (or a steep hillside), whereas 750k will buy you a 3 bedroom place with a decent garden. You may well have "lovely", but within limits. Tough call for a family. Living debt free though, ahh, there's the rub.

This game's kind of fun.

[benhila]

We used to call it Monopoly back when....

[bob_the_engineer]

EEEK 500K 750K???

300k,, 3 bed,, quarter acre garden, eastern hills lower hutt (need some work) I bought that 6 months ago very very nice area. The prices have fallen since then! Don’t pay the asking price, and don’t buy a house with a view, if your young enough to be buying with a mortgage you don’t have the time to look out the window!

Bob

P.S. look out for the agents who think an accent means your rich! :exit

[thewoodies]

cant sell here (UK) will have to rent when we get there - dont know if
" chiba "is right :confused:
but it makes everything seem more positive! Thanks

[Alan]

...and of course you can stick your half million deposit into a savings account and earn 8%, which will be around $470 per week in interest even after tax at 39%, which reduces your rent to $30 per week. :)

...or bank it off shore and earn $625 a week while not paying tax at all. :yes

Just rough numbers, but do you still want to buy?

Slightly off tack I know, but where can you get best advice about banking money offshore to achieve this sort of return?

[JandM]

I'd like to know that, too.

[thewoodies]

Slightly off tack I know, but where can you get best advice about banking money offshore to achieve this sort of return?

Try -ANZ off shore accounts - they will also offer currency exchange.

Or go on the internet and look for banks in jersey, guernsey or isle of sky (u.K.)tax implications have changed so you would have to check.

[benhila]

I would highly recommend Nationwide International off-shore; they give good rates (6.3% if my memory serves me right) and their service is great. No-hassle transfers, prompt response to queries, always someone at the other end of the phone. On the other hand, avoid Alliance & Leicester if you can. Same rates but their service is crap, a BACS transfer takes 5-6 working days and they NEVER respond to your queries.

Hila

[Red Devil]

Slightly off tack I know, but where can you get best advice about banking money offshore to achieve this sort of return?

I'd like to know that, too.

... I'd like to know how to get hold of the half million deposit ;) :D

Seriously though, we're pleased with our NatWest Offshore account. We went for the 'ibanking' option for ease of transferals and it worked a treat whilst living in France last year... will definitely stick with it for when we arrive in NZ.

NatWest Offshore (http://www.natwestoffshore.com/offshore.asp)

[Alan]

I have since read that that you get taxed on all income verywhere in the world by the IRD, so I am not sure about this comment of tax free income from off shore account.

Also believe any income left overseas, that isn't taxed there is then taxed by the IRD.

[Milliemoo]

I have since read that that you get taxed on all income verywhere in the world by the IRD, so I am not sure about this comment of tax free income from off shore account.

Also believe any income left overseas, that isn't taxed there is then taxed by the IRD.

There's an agreement with NZ IRD that any overseas investment is tax free for 5 years.... or something like that. I'm sure someone will post a link to the correct info. So if you have funds in the UK, they can sit tight earning interest while you wait for the exchange rate to pick up and house prices to plunge.

Milliemoo

[Milliemoo]

Here we go:

People arriving to live in New Zealand on or after 1 April 2006 may qualify for a temporary tax exemption on their foreign income. All foreign-sourced income will be exempt, except for employment income connected with employment performed while in New Zealand and income from services. The exemption starts on the first day of the month that the person arrives in New Zealand to take up the exemption and lasts a further 48 months (four years). To qualify, an individual cannot have been tax-resident in New Zealand during the previous 10 years.

http://www.ird.govt.nz/technical-tax/legislation/2006/2006-3/leg-2006-3-temp-exempt-tax-migrants.html

Milliemoo

[Alan]

Apparently though you forego any entitlement to Family Tax Credits if you take the 4yr option.

[IanW99]

Apparently though you forego any entitlement to Family Tax Credits if you take the 4yr option.

Very true, but you can forgo the 4 year option at any time and start claiming Family Tax Credits instead if that works out to be the better option. You can't however go back again.

Ian

[incredible hulse]

Well that's certainly one way at looking at it. :exit

I'd completely disagree with you though. IMHO Anyone buying a property now, or for that matter who has bought in the last 2 years, will see the equity in their property decrease and then level of in the next 5 years (if your lucky).

Agree; personally would hold off at present whilst the media driven panic is on but wouldn't be concerned if bought 2 years ago to be in negative equity. The 'downturn' round here is more in terms of time to sell (would like to see Winter figures from previous years though to compare) rather than massive reductions in price in the last 6 months. Even then there was 18 months of huge growth to factor in to balance any correction.

[M-Squared]

Buy now! You can't guarantee that prices will drop even more. If I could, I'd buy a second property for rental. Properties for rent are in terrible shortage, 'tis the way to go. :)

[Milliemoo]

I've seen a HUGE increase in available properties to rent in the last year, in our neck of the woods. Lots of people who are having trouble selling are putting there homes up to rent and I'd almost go as far to say you're spoiled for choice! It's a amazingly different from when we first arrived at the end of 2006. Like different ends of the spectrum.

Rents will start to decrease for sure. I've actually been surprised that there have been reports in the press in rents increasing. I suspect this is more to do with landlords thinking they can cover their extra costs by bumping up rents. Nice idea, but doesn't work in a highly competitive market.

I think more rentals are coming available as people start to move into together and flat share to save money. People who perhaps were in a 1/2 bed unit are now feeling the 'crunch' and are going back to flat shares to save money.

Milliemoo

p.s Just as a side note.... I don't recall so many people complaining about the media when all they did was report on record house price growth for the last 6 years or so. If it's the media that's spurring on the house price slump surely the house price boom was down to the media?

Seriously though, yes the media plays a small part in so much it should reflect the current 'mood', but with all that's going on in the world economy and financial markets, I'm surprised people are still trying to blame it all on the press!

[incredible hulse]

Not trying to blame it all on the media but yes I do think media coverage of rising houses prices, shortage of houses, investment opportunities does influence the house price upwardly. It aids the sheep effect. Apart from oil prices being high, employment levels are still good, interest rates are looking like they are coming down, immigration is still positive and wages are still going up. Financial markets are better off than 3 years ago with usual cyclic movements; personally not hitting the panic button yet although as I said if I was a buyer now I wouldn't be jumping into the market just yet unless it was for a real bargain in a solid area. I'm in the wait and see period at the moment

[Milliemoo]

Not trying to blame it all on the media

Apologies if you thought my post was aimed at you. It was general observation.

The more I think about it though, the less convinced I am that it has any direct effect. I think it prompts people to discuss the issues more and keeps the topic fresh in peoples minds, but so long as facts are being reported, I can't see how media can take 'blame' as such. The facts of the housing market come about due to supply and demand, employment levels, current financial issues etc and as such reflect the trend in values.

I guess it starts to get a bit grey when you realise how much of what's reported is different peoples opinions and different interpretations of the the facts, or stats as is the case a lot of the time where property watching is concerned. A good example of this is that you are of the opinion that employment levels are "still good" and immigration is "still positive" whereas I'm of the opinion that unemployment levels are on the increase and the immigration levels are down. I'm not saying that what you said is wrong because it's not....it's just a more positive way of looking at things, while I'm choosing to focus on the negative.

Now, this involves too much thought at this time on a Saturday morning, and I can be a bit dim at the best of times, so I'll shut up now.

Milliemoo

[batgirl1001]

Can I ask.....so is the reports on the property housing markets being on the downslide true? I've read quite a few here and there and they seem to be consistent on that.

I think it is hard to figure out the renting vs buying option unless you are there in NZ and have been in NZ for a while until you get a feel for the market. I heard of lots of migrants who end out excited and buying a house only to find out they are paying too much out of their pockets.

I am thinking of various ways including the option of financing the property offshore, renting long-term before buying in the down market, buying sections first and then building a house etc etc. There are many options available but figuring out which one works best for me is probably something I can find out for myself only when I am there.

I will try to keep a tab on the housing market in NZ till the BIG MOVE.

In the meantime I saw the postings on tax-exempt incomes earning from overseas. So does that means if I come to NZ with 100K in my pockets, I might be taxed on that if I banked it in to earn interest?

[Nathan]

At least two important financial considerations are absent from the buy vs. rent discussion.
1) Owning a home will require maintenance/up-keep costs.
2) Renting will often entail periodic moving/set-up costs.

[Chiba]

At least two important financial considerations are absent from the buy vs. rent discussion.
1) Owning a home will require maintenance/up-keep costs.
2) Renting will often entail periodic moving/set-up costs.

You'll also pay rates if you own your house; on rentals it's built into the rent, so you need to consider it for like-to-like comparisons. Total rates on our rental would be $3,127.15pa, so it's not small change.

As to maintenance, it's not just the cost; it's the hassle - if anything stops working we just call the landlord. Our current rental even includes a gardener; the last place we had to work hard to keep the garden going, which is some people's hobby I realise, but at the moment we've a small family so it's a lot more enjoyable just playing in it, not weeding it. When our kids are bigger we'll grow stuff, but for now it's great not having to do it.

The only drawback I can see with rentals is that you're not totally free to decorate as you wish. Most owners are sensible enough to go with really plain decor, but I think it'd be pretty grating if you were stuck with flock wallpaper... :laugh

[Rusty]

Apologies if you thought my post was aimed at you. It was general observation.

The more I think about it though, the less convinced I am that it has any direct effect. I think it prompts people to discuss the issues more and keeps the topic fresh in peoples minds, but so long as facts are being reported, I can't see how media can take 'blame' as such. The facts of the housing market come about due to supply and demand, employment levels, current financial issues etc and as such reflect the trend in values.

I guess it starts to get a bit grey when you realise how much of what's reported is different peoples opinions and different interpretations of the the facts, or stats as is the case a lot of the time where property watching is concerned. A good example of this is that you are of the opinion that employment levels are "still good" and immigration is "still positive" whereas I'm of the opinion that unemployment levels are on the increase and the immigration levels are down. I'm not saying that what you said is wrong because it's not....it's just a more positive way of looking at things, while I'm choosing to focus on the negative.

Now, this involves too much thought at this time on a Saturday morning, and I can be a bit dim at the best of times, so I'll shut up now.

Milliemoo

I do agree with your post in saying that the media are only reporting what is happening and also that it depends on whether you view positive and negative (just trying to paraphrase, so sorry if I got it wrong).
But, unfortunately the media almost always try to sensationalise the news to make 'an angle' that is different. EG - it is not news that the market is still down a bit, but it is if you say major slump, etc....read my paper/look at our headline!
Put it another way. If there are 10 reports; 1 says all is great, 8 say prices down 5-10% and 1 says potentially down 40%, which one does everybody think got on the TV and in the press? - what they are reporting has been said (40%), unfortunately just not balanced or full reporting.
Just my thoughts. As you can tell, I am very sceptical of anything in the press and some things on TV news. - Wish the news was like it is in Superman;) chasing the truth, not selling papers with the biggest headline.

[IanW99]

...
In the meantime I saw the postings on tax-exempt incomes earning from overseas. So does that means if I come to NZ with 100K in my pockets, I might be taxed on that if I banked it in to earn interest?

Yes, if you bank your deposit in NZ then you will have to pay tax on any interest earnt.

If you keep the money in an overseas account then you are tax exempt for the first 4 years (assuming not claiming family tax credit of course).

However, interest being paid on NZ accounts is higher than you are likely to get anywhere else, so the difference may not be as great as it would seem.

Ian

[Milliemoo]

Hi Rusty,

Completely see what your saying and it's true that at the end of the day, media needs to sell, so they'll choose the most sensational headline. Of course the same will be true of when the property market was going through the roof.

It does get a bit irritating. You read a headline and continue through the report and sometimes it's as if the headline has been deliberately taken out of context just to catch peoples eye! I don't think this is anything new though and in terms of the recent reporting on the downturn in the property market, I think people are more sensitive about it because they think they're loosing money, when in reality for the majority, it doesn't really effect them at all.

People read the headline "Slump" (which I actually think is a very fair way of describing a 53% drop in sales!) but that's all the see and instead of reading the report they assume the reference is to house prices. It did the job though and caught peoples attention, which at the end of the day, is what they want.

I tell you what I like reading..... the 'Your Views' section on the Herald website. Can be very funny at times :nice1

Milliemoo

[Rusty]

I try and read the Herald when I get spare time sitting here in Limboland.
You are right, the papers are doing nothing new, there are just more places to get the news.
People are scared of buying a house and now scared of negative equity - I don't understand this at all (if you are buying somewhere to live, the price in a year is irrelevant?). Either they can afford the martgage and want a house or not. Only investors shoudl be worried as they are more likely to sell quickly. Unfortunately, whatever I believe makes no difference because, like you said, houses just aren't selling.

The only good thing (well for me anyway) is that NZ seems to be having the same problem - not good for those selling over there - know how you all feel :mad:

[Mickstim]

We have opted to rent for the time being until we see which way the wind blows. We are lucky enough to have enough cash in the bank offshore (at 6.3% tax free) that the interest pays our rent and leaves us a bit over. (I would mention that it has taken us our whole lives to get to this point and we are now retired so please don't be too envious!)

We rent a beautiful architect designed home and I don't think we would be able to buy it with the money we have. There is a slightly unsettled feeling as it is not ours but after spending 9 months desperately trying to sell in the UK there is also a sense of relief that we are not trapped by owning a home.

I'm sure we will buy eventually when the market seems right, the exchange rate is better and we are quite sure about where we want to be - but meantime we will sit tight and enjoy the freedom!

Bx

[Nathan]

You'll also pay rates if you own your house; on rentals it's built into the rent, so you need to consider it for like-to-like comparisons. Total rates on our rental would be $3,127.15pa, so it's not small change.
r... :laugh

...and insurance....