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Worried You’ll Miss The Boat?

Don’t get suckered into buying something that doesn’t fit with your purchase criteria and your long-term goals, says Debbie Roberts.

By: Debbie Roberts

1 January 2021

With the property market reaching new record heights seemingly every month lately, many people are feeling frustrated about their lack of progress or their ability to purchase. This fear of missing out can result in panic buying. We are hearing a lot of “I’m worried that if I don’t buy something soon, then I’m going to miss the boat”. If that sounds like you, then listen up. There is always another boat on its way, so chill out.

What About Rbnz’s Announcement?

Does the move from 20% deposit up to a 30% deposit for a standard residential investment property stop you in your tracks? It might stop you for a while if you are using a cash deposit, but if you are using equity in another property you already own, then it won’t take long before house price increases take care of that problem for you. What about the possible introduction of debt to income ratios (DTI)? At the time of writing we don’t know what that will look like, or even if the RBNZ will decide to introduce those restrictions, so it’s tempting to say don’t worry about something that might not happen. But if it does, remember that this is unlikely to be the end of the world. Bank lending rules change all the time. In fact, DTI was how lending was determined less than two decades ago, and people were still buying property back then. Banks make their money by lending money, and where there is a will there’s a way. Also remember that all banks are different, so get help from an independent mortgage adviser who understands property investment and can put your loan application with the bank that best suits your financial position. Here’s a suggestion: speak to a mortgage adviser and get a pre-approval to purchase in place now if you can, as the banks may be able to honour existing pre-approvals even if rules change.

‘Don’t make the mistake of buying something because you are afraid of missing the boat, or you might find that you end up buying the anchor instead’

Goal Setting

If the RBNZ restrictions affect your ability to purchase for a while, then use your time wisely, make a plan and stick to it. When the RBNZ first introduced loan-to-value ratio (LVR) restrictions many first home buyers got frustrated, and instead of continuing to save a bigger deposit, they spent it on cars and holidays. I wonder how many of them now regret those choices? Buying property doesn’t happen automatically, and it is never easy. Whether it is your first purchase or your fifth, the new lending rules mean that now more than ever you need to have a strategic plan in place in order to reach your long-term goals. But first, you have to decide what it is that you want from your long-term goals. More importantly, you should think about why you want that. Your “why” is what will keep you motivated when it seems like your “what” is out of reach.

Don’t Be A Sucker For A Sales Pitch

If someone has a vested financial interest in a property that you are looking at purchasing (because they are the real estate agent, or a financial adviser getting a kickback from the developer), do you think they are the best person to get advice from about whether it is a good investment for you? Be clear about what you need from your next property purchase in order to achieve your long-term goals, and you’ll avoid becoming a salesperson’s sucker. Don’t make the mistake of buying something because you are afraid of missing the boat, or you might find that you end up buying the anchor instead, which could actually prevent you from moving toward achieving your long-term goals. Property investment has become less about the property, and more of a game of finance. Remember that property investment is not “one-size-fits-all”. It should never be urgent. It should be strategic, well-planned, and well thought out because property investment is a long-term strategy. If that doesn’t sound quick enough, exciting enough or easy enough for you, then perhaps you shouldn’t be looking at investing in property.

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