Learn to love the journey...
Enter COVID-19 and tens of thousands of New Zealanders returning home without a plan other than reconnecting with the fam and getting back into their Kiwi lifestyle. Which has changed for many people whose first instinct is looking for a patch!
Naturally, we are feeling the pressure during this pandemic on everything from jobs to housing to yes, even more people at your local cafe. Of course, we welcome everyone home with open arms. We feel so very fortunate to be living in this country, with so many opportunities and far from the madding world. Then it starts to become obvious: this thing called competition. You see more people on the open home circuit, more people at job interviews and definitely the numbers are up at property auctions. You have been to four auctions and lost all of them by a huge margin. What happened to our so-called buyer's market? It's in hibernation. Today, with so few homes on offer for the many buyers out there, the tables are turning toward Vendors. The market cycle is continually moving - which is something you can learn to use to your advantage.
So you've been making the rounds and you're not liking the selection of homes on the market. You quickly realize you have to be decisive or risk missing out on the good ones. The question hangs in the air: why don't more people sell in this market? Surely this competition is a good thing for sellers of homes? Don't forget that kiwis tend to be a bit skittish about letting go of their security in tough times. That house is a huge security blanket even if the value did fluctuate a bit in the early year. Hanging onto a property is in a very real way, hanging onto a way of life.
So we are blessed and cursed at the same time. New Zealand is increasingly seen as a good place to live, and it's a heck of a place to put down roots again in the middle of a pandemic with so many people seeking security in an uncertain world economy.
Fortunately, our government has implemented a number of strategies to keep create a balance between real needs and growing our economy. Wage Subsidies and SME Business Loans have played their part in keeping things humming while we're holed up at homeschooling our kids on iPads and Zooming with our clients and colleagues. The immense investment in infrastructure has meant many jobs being shifted to where the work is. Should we just hunker down and get through this or take the leap and buy now in such uncertain times? The main school of thought from an investor's perspective is always to buy now, buy often and keep buying!
“Buy when there's blood in the streets, even if the blood is your own.”
Barron Rothschild, 18th English Nobleman and Banker
Rothschild should know. He made a fortune buying in the panic that followed the Battle of Waterloo against Napoleon. So while it's a great time to buy, is it also a great time to get financing? Yes, actually! Who could imagine sub 3% interest rates just a year ago? Borrowing to purchase a property makes sense even if you have cash or investments you could liquidate. Why would you want to sell your investments for cash to buy property if their values are on the rise and earning over 6% - when the cost of borrowing is less than half that?*
You may be surprised to find getting a loan a bit of a challenge with our increased legislation. No more signing on the line for a loan extension overnight, even if you have banked for 20 years with the same institution. Everyone is getting the patdown. Relax and let your broker make the paperwork go on it's way to the assessor. Considering most brokers like me offer free advice - take it! Know also that the bank is predisposed to helping your broker get the job done and keeping everyone employed. We are all in this together, after all.
If you have not borrowed money from a bank in a while, there are a few new hoops regarding your identity (AML), job security and intentions. Surprise: if you are over 45, you will be asked for an exit plan...just have one! Selling your house to downsize at age 65 and enjoy the proceeds is clearly what most people will do anyway. The days of offering 30-year loan terms to 60-year-olds are well and truly over.
So in uncertain times, use volatility to your advantage. Be calm and be the boss. Others may be less prepared or just nervous. You can be ready to jump when you see a great investment opportunity. With your loan application preapproved and a clear plan on what you want to achieve - you are way ahead of the game. Naturally, you will perform all of your own due diligence on each prospective property with contingencies in place well before you sign on the dotted line. Build a great team with your mortgage adviser, building inspector and solicitor to put together your deal quickly and efficiently.
And what about all that uncertainty in the market? It's easy to fall into the view of things going the wrong way, but we have all been in challenging times before and somehow we always get through them. My advice (after you have a great broker, solicitor and inspector team in place) is to relax. Practice meditation, take up running, spinning wool, baking, or whatever relaxes your mind to help keep your perspective. And by the way, I am offering an Advice First service for returning ex-pats who need a little grounding.
What's my best advice in this market? Be prepared, develop a positive mindset, take a deep breath on your way into the auction room, assume your position and command the bidding with confidence.
You've got this!
© 2020 susan templeton / niche mortgages
*Follow the RBNZ for OCR rate changes and stay in touch with your financial adviser if you are in the market to buy.