When is a good time to buy a house?
Posted by Faith, 20 May 2008
“Is this a good time to buy a house or, with the house prices falling, should I wait awhile?” This is the question many of my clients are asking me right now.
My answer, whatever the market, is always the same, “If a property is available at the right price, and is what you need and can afford, then buy it.”
Of course, this message is qualified by such phrases as “right price”, “what you need” and “can afford”. However, if you know the market AND if you can get these three things right, then anytime is a good time to buy. The “bargain of the century” comes along at least once per week in my experience, regardless of market conditions.
Let’s look at these in more detail:
1. Know the market
If your target home or property is in an inner-city area, then do your research there. If your target is a home in the suburbs or even the country, then that is where you conduct your research. Find out what is for sale by asking several real estate agents, read the property section in the newspapers and websites, and drive or walk around the areas to view a number of properties to see what you get for your money. Take your time to build your knowledge and confidence from several different sources. Don’t just talk to one person or one company and don’t ever believe there is only ever one good deal for you.
By doing this research, you will come to understand the difference between fact and what the media and the uninformed tell you. For example, the current assumption that ALL house prices are falling is not correct. Different areas of New Zealand, and different suburbs in the same city have different performances. The Real Estate Institute of NZ has some actual facts that will surprise you – like the areas in which house prices continue to rise.
http://www.reinz.co.nz/reportingapp/default.aspx?RFOPTION=Report&RFCODE=R100
House prices, like many other things, are usually driven by supply Vs demand. If there’s more people needing to buy than actual houses for sale in the area you want to buy in, or in the type of house you want to buy, then the “rock bottom” house prices you are waiting for may never happen.
2. The right price
This is not just the purchase price of a property, but also the interest cost of any money you need to borrow to purchase the property. Understand that interest costs can change. It’s great if they go down, but you need to manage financially if interest costs stay at the current rates for some time, or even rise. There will also be other costs (such as legal and the moving expenses) when buying property. Talk to a number of lending agencies and banks to determine the best rates available and what you can afford.
3. Buy what you need and can afford
What you need, versus what you want, are two very different things. My clients sometimes have difficulty in working this out. If you want to live in the inner-city area, but you can’t afford even a shoe-box sized apartment, then you need to consider other options like buying further out in the suburbs, or think of other ideas such as buying a “do up” and restoring it over a number of years. On the other hand, you may not have the skills or time for renovation projects, and this could cost far more than expected anyway. So, it’s always best to start with thinking about what you really need in a home, instead of what you’d really like to have. For example, do you need space for a growing family, do you run a home office or do you have other special needs that require an essential space or layout in a house? These are needs (also called “have-to-haves”, and not wants (which are “like-to-haves”).
Matching the “needs” question is another question about what can you afford to pay for a property. Affordability is the real determinant of what you will buy. This will depend on the answers you came up with in 1 - 3 above. This doesn’t mean you can’t draw up a list of all the things you’d like to have, too. This will be handy when you have to compare and choose between a number of properties to buy.
If you aspire to own a higher-value property on your first step, but can’t afford it, it helps to accept that very few other people can “leap tall buildings in a single bound” either. The important thing to remember, if you want to own your own home, is that you need to start with a place you can afford. In time, and this may take several years, you could be in the position to trade up. In the meantime, you can still enjoy owning and living in a home that fits your basic needs. If you don’t make a start, even a modest one, home ownership could elude you forever.
And this brings me to my final point. If your goal is to buy your own home, then start saving today. Every day I hear statements like, “It’s tough for young people” or “As a single person, I can’t afford to buy a house.” However, it gets back to my earlier point about learning to test assumptions. That is, while it can be tough, many people (whether single or in a partnership) do actually buy their own homes. Many don’t get help from their parents, nor do they have high incomes or somehow stumble across the one “bargain of the century”. The difference is that they made up their minds to have a go. Any journey, even a long one, starts with the first step.
Whether saving a few dollars per week, or searching for “how to save” books at a library or checking out Internet sites about property – just begin. Decide to take your first step today.
Any time is a good time to start saving, just as anytime is a good time to buy a property – as long as you can purchase at the right price, it is what you need and you can afford it.
---ends---
Want to know more about how to make better choices about money? Check out Faith’s Fact Sheet.
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