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The Biggest Challenge This Year

The biggest challenge facing both homebuyers and investors might not be the one you think, writes Debbie Roberts.

By: Debbie Roberts

1 February 2021

It’s Not The Loan-To-Value Ratios (LVRS)

The requirement for larger deposits will absolutely take some buyers out of the market for a period of time, but it’s not permanent. If you are a firsthome buyer, in addition to continuing to save your deposit, finding a mortgage adviser who works with a variety of banks and non-bank lenders could help you to find a lender who can accept a lower deposit. If you are planning to use equity in a property you already own, then all you need is time to let capital growth increase your available deposit. Remember also that new builds are exempt from the increased deposit requirement with most lenders (although new builds might not be the best choice for you). If you are not affected by the requirement for larger deposits, then this is great news for you as a buyer. With a few less buyers in the market to compete with, this increases your chances of successfully purchasing.

It’s Not The Debt-To-Income Ratios (DTIS)

Some banks imposed their own DTI rules even before the Reserve Bank started to look at this again. However, I do believe that some people need DTIs in order to save them from themselves. Many people who come to us for help have over-leveraged themselves on properties that they shouldn’t have bought.

DTIs will make property investment even more of a game of finance than it already is, meaning it will be more important to balance capital growth and cashflow. DTIs certainly won’t be the death of property investing, they will just change some of the rules. For those of us who have been around for a while, it will be familiar territory as this was the norm when we started buying property.

Whether the property market increases or falls in value, it’s important to understand that it is a normal part of the property cycle, and there are opportunities at every stage’

It’s Not The Residential Tenancies Act Changes Or The Healthy Homes Standards

These changes will get rid of many of those rogue landlords (aka slumlords) who give property investors a bad name, and it will certainly improve the life of many tenants across the country. Although we think some of the changes have gone a bit over the top, good property management systems and insurance will help with most of the worst-case scenarios. Property investment will still continue to be the best way to increase wealth over the long term for most New Zealanders.

It’s Not The Property Market

Whether the property market increases or falls in value, it’s important to understand that it is a normal part of the property cycle, and there are opportunities at every stage (not only during a boom) if you know what you are doing. There are always people who lose money in a falling property market, and there are also many others who make huge gains. Instead of trying to figure out when to buy, you should be trying to figure out what strategy to use in order to reach your long-term goals.

So, What Does That Leave?

The biggest issue facing buyers this year will be lack of knowledge. This results in a lack of confidence, and fear of making a mistake, which can lead to over analysis and self-sabotage. It can also lead to blissful ignorance, where people only learn of a mistake after they’ve already made it. Lack of knowledge often results in buyers playing the “blame game” where they find someone or something else to blame for their lack of success, which has never helped anyone. The way to get past this hurdle is to increase your knowledge. There are two ways to do that. The first way is to do it yourself, researching as much as you can on your own (which takes time), and learning from your own mistakes (which can be very expensive).

The other way is to learn from other people’s experience and mistakes, which is generally a lot faster and cheaper than the DIY method. Just be careful if the person who is helping you has also got a vested financial interest in a property you are considering buying.

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