Buying a house doesn’t make you greedy (featuring infographics)

Good blog tip for writers low on ideas: find some infographics and talk about them.

This week I’ve stumbled across two very interesting infographics relating to real estate and – something dear to our hearts – real estate photography. The fact they both came out this week gives me reason to combine them into one decent sized blog post, thus keeping the pay cheques rolling in. Good times.

So without further ado, or padding…

 

House buying makes you greedy??

NZ Herald infographic Greed Auckland

Today’s New Zealand Herald contains a ‘report’ into which New Zealanders are the most naughty, using the Seven Deadly Sins as criteria. In a conclusion that will delight many south of the Bombays, Auckland was declared ‘Sin City’ for winning in four of the seven categories.

Although the Herald described it as a ‘lighthearted look’, there is one section where they missed the mark entirely.

In their citation for Auckland’s win in ‘Greed’, the Herald wrote:

An insatiable demand for real estate in Auckland is helping to grow a widening gap between the rich and poor.

Couple this statement with their definition of greed as the “excessive desire to possess more than one’s needs” and one can sense a theme: buying property is greedy and keeping the poor down.

Data from Statistics New Zealand, in plain English, show those richest 20% of Auckland households earning 4.22 times more than the poorest 20%.

It would certainly be good to reduce this gap. But blaming that on people buying houses makes as much sense as blaming the All Blacks for winning the World Cup by scoring more points than the French. That jerkface McCaw has a lot to answer for!

The article almost seems to suggest the answer to reducing inequality is to stop people buying houses. The real answer is to bring everyone up – not hold anyone down.

Buying a house, so long as it is for a reasonable price and with a sensible mortgage plan, is about the best thing you can do to improve your lot in life. It gives you an asset to borrow against if need be, and best of all it provides a roof over your head that can’t be swiped away by some landlord.

And with the lower quartile rent for a three-bedroom Auckland house $163 above the rest of the country, renting isn’t exactly a cheap alternative. Far better to pay off your own house than someone else’s.

People buying a house – not greedy. Investors buying property – pretty hard to call that greed when it’s a far sounder investment option than most others. No, the Herald needs a far sounder way to measure greed than by singling out those trying to achieve financial security.

 

Using a pro makes you smart!

Meanwhile, here’s an infographic Open2view can agree with:

Professional Photos Net More For Your Home
Source: RuxtaReality.com

 

As we have said here and here, professional real estate photography means better marketing, more attention and higher sales prices. This information comes from data collected by Redfin and while the numbers are American, the principle is universal.

So what do you reckon – are Auckland property buyers committing a sin? Are you telling your real estate agent to use a pro photographer? Are infographics great or what? Share your thoughts below or on our Facebook page.

One thing everyone can agree on though: nothing beats a decent pie chart.

Literal pie chart

 

If real estate is so expensive, why are so many first timers buying?

rally crowd large

First home buyers and investors jostle for position at an Auckland auction. (Maybe.)

 

Despite the cost of living, it remains very popular. This old saying has been causing eyes to roll – consequently ruining many a marriage – for years now.

Financial matters can also cause couples great stress – and buying their first house will be the biggest investment most will ever make.

Much has been written on rising house prices and lack of supply; there will be plenty more written yet.

And yet, despite the high cost of housing, it still remains popular – and data released last week suggests first home buyers are getting in on the action.

 

The good news

The February BNZ-REINZ Survey talks monthly to 10,000 agents about their thoughts on the market. The February edition shows a net 48 percent of agents noticing more first home buyers (to be known as ‘FHBs’ for the rest of this blog to avoid RSI) in the market. The record is 49%, set one year ago, and is up sharply on last month’s 32%.

The Survey also asks what is motivating people to buy. ‘First home’ ranks highest with 14.6% of buyers looking to start the climb. The next most popular reason is, unsurprisingly, ‘good interest rates’ with 14.3%. (‘Relationship breakdown’ comes in at 8.6%. Get some more iron in your diet.)

Wellington and Manawatu/Wanganui are dominated by FHBs (63.5% and 62.5%). And how is the fiery, foreboding fete for first timers that is Auckland? Actually, at 47.5%, it’s pretty good.

Data from First National Real Estate last week backs this up. Their January figures show FHBs make up more than 50% of buyers in Hawkes Bay, parts of Tauranga and Ilam in Christchurch. In Glendene, Auckland, 51% of homes sold were to FHBs.

 

The obstacles

I contacted Colleen Milne, First National’s General Manager, to find out where else Auckland’s first timers were shopping. Most areas they collect data on – including Howick, Papakura and Swanson/Waitakere – only showed 10% FHBs, while one fifth of Manukau’s sales last month were to new entrants.

Location, of course, will always factor whichever number home you’re up to. So what other challenges are facing FHBs?

Investors

If first home buyers are the lovebirds of the real estate market, investors are sometimes seen as the heartless vultures that swoop on their nests.

That’s a bit unfair. The real estate market is, even after the end of the boom in 2008, a good investment. It’s hard, therefore, to blame people for getting in on it. The advantages that come with buying a home as a business (such as lower and tax-deductible interest rates) are compelling motivations indeed.

On the other hand, Colleen Milne identifies some key differences between FHBs and investors that could preclude them from fighting to the death over every single house.

“There is no doubt that first home buyers are competing with investors,” she says. “However investors are primarily looking for that good buy returning a yield when rented. The first home buyers are more focused on holding the property understanding that this may be their family home for 10 years.”

Monday’s New Zealand Herald editorial recommends taking away the interest deductibility on rental houses. If doing this, they say, “discouraged residential property investment, lowered prices for first-home seekers and forced established home-owners to look for more productive uses of their savings, the country could be better off socially and economically.”

It will also increase rents – and despite what the Herald implies, many people would rather rent than own for a number of reasons (incidentally we explained why buying is better a while back).

There’s no sign that changing these tax rules is on the Government’s agenda, but we’ll continue to keep an open eye – and mind – on this.

 Auctions

Auction hammer

Colleen Milne sees the cost of auctions as another challenge for newbies.

First National auction off “appropriate properties”, she says, “but not all properties should be auctioned.

“There are excessive costs with auctioning for the buyer, legal fees, investigating titles and LIM reports, building reports and the time and disappointment. This also contributes to the cost of entry for the first home buyer.”

That isn’t to say you should boycott auctions. Ignoring what could be your perfect first home because of the method of sale would be an awful waste.

It is also hard to tell if the growing popularity of auctions will continue. The percentage of houses auctioned in Auckland last month halved from December to just below 20; this is still higher than January 2012 and as real estate expert Alistair Helm says, February’s figures will give us more solid information. The fewer auctions, it seems, the better for FHBs.

 

It’s a good news sandwich

Let’s end on a happy note.

The Roost home loan affordability report for first home buyers is an excellent resource and required reading for FHBs.

As of December it takes 47.5% of a 25-29 year old’s median income to pay the mortgage on a lower quartile house. If that seems tough, consider this:

In June 2007 this figure was 74.6%.

If you’re a couple looking to buy, the figure right now is 22.8%.

As the report says, “lower quartile housing is affordable for families in New Zealand when both adults work.”

Maybe that is the main reason first timers are still buying big. What is certain is it’s a good reason to keep each other sweet. Reduce your stress levels. Take him on a picnic. Surprise her with rugby tickets. And keep your eyes firmly facing frontwards.

O2V Q & A: Chris Pringle on cricket past, present and future

Chris Pringle

Chris Pringle in full flight with the ball.

Cricket fans will fondly remember Chris Pringle and his exploits – from his unusual 1990 debut against England, to that brilliant maiden over against Australia (which sent at least one child running around his house screaming in joy) and many other great performances for the team then known as the ‘Young Guns’.

After 64 One Day Internationals and 14 Tests, Chris moved to the Netherlands where he played out the remainder of his cricket career. It was here where he met his wife and where his two children were born. His ten year old son, Tim, already has a hat-trick to his name, proving bowling is well and truly in the Pringle DNA.

In 2004 Chris entered the equally competitive world of real estate. RE/MAX Cross Country Tauranga are regular users of Open2view’s services and understand the power of professional photos when selling houses.

Really, though, what you want to know is about the cricket. We recently asked Chris about how we can beat England, the future face of New Zealand cricket, and how he would have fared in the modern era.

chris-pringle autobiography

All zinced up and raring to go.

All right, share your secret – how do we beat England? How do you rate our chances in the various formats?

I am sure we will be competitive in the short forms of the game.

Our ability to beat England in the test matches will rely heavily on swinging the ball & building long partnerships.

Who among the Black Caps do you see as potential standouts in this series and beyond?

I have big wraps on Kane Williamson. He has an incredible work ethic. I am sure he will captain New Zealand for many years and be our greatest batsman.

You started your career against England in rather remarkable circumstances, could you tell us about that?

My career started in an unorthodox manner.

I was in England playing league cricket when the New Zealand team were touring there. I went to Headingley to get some tickets for the game. I saw the team bus arriving as I did. The team was full of injuries. 24 hours later I was opening the bowling for New Zealand…

We’ve had (to put it mildly) some difficult times in New Zealand cricket lately: if you were the boss how would you go about fixing things?

If I was running New Zealand cricket I would pouring as much money into kids between 8 and 12 as possible.

Cricket is a huge muscle memory and awareness game, and all the habits are learnt at that age. Learning bad habits are very hard to rid.

How do you think you’d have done had Twenty/20 been around when you were playing?

As I was more successful at the short version of the game, I think T20 would have been right up my alley.

 Chris Pringle RE:MAX

Chris Pringle in full flight selling houses.

What inspired you to make the move into real estate?

I chose to move into real estate because of the desire to work for myself.

Finally, what is it about Open2view that keeps you using us?

Open2view photos properties extremely well. This is vital for successful salespeople who are trying to get the best price in the shortest period of time.

Check out Chris Pringle’s Cricinfo profile and stats as well as his Open2view profile (which is a bit more real estate focused). Finally, take a trip back to cricket’s golden days and watch his last over heroics against Australia’s Bruce Reid – skip to 5:15 in for the gripping climax.

January Property Report: real estate remains real busy, the wisdom of homeowners, and why LVRs are no good

Open2view #285324

So how did you spend your summer holidays? While most of us took advantage of the golden weather, more folk than usual decided to indulge in some real estate instead.

What does that mean for the market? Let’s take a closer look, shall we? (It’d be kind of anticlimactic to say no.)

Wishing you a Busy New Year

The January edition of the NZ Property Report provides us with the following factoids:

The seasonally adjusted asking price rose 4.2% to $440,507; this is up 5% on January 2012. For just the second time in history the asking price in Auckland exceeded $600,000 – 12.4% higher than same time last year.

8,849 new properties came onto the market in January, up 3.6% on the same time last year.

Inventory has stabilised at 29 weeks nationwide. This is still below the long-term average of 39 weeks, and Auckland and Canterbury continue to be affected by heaps of demand in relation to supply.

For more information and data for your region check out realestate.co.nz’s Unconditional blog.

That awkward Auckland moment…

Early in the New Year, a crafty Auckland housebuyer consulted his calendar, rubbed his hands together and thought “maybe I should get in on the property market while everyone else is out swimming and having barbeques.”

Alas, at his first open home he discovered a whole lot of other Aucklanders had exactly the same cunning plan – resulting in an extremely busy month for real estate and a lot of sossies going to waste.

Barfoot & Thompson, Auckland’s largest real estate firm, reported its biggest number of January listings (1440) in five years and the most January sales in six.

Those 820 properties sold generated an average price of $600,754 – down on December but the first time over $600,000 in any January.

So will this unusually busy start to the year continue on throughout the, uh, year? Our photographers have definitely been busier this summer, so February’s stats will be read with great interest.

LVR: Leave Vendors (un)Regulated

More evidence that talk of imposing Loan Value Ratio limits (LVR) would punish the wrong people:

Liam Dann, Business Editor of the New Zealand Herald, wrote a very compelling piece on the issue of LVRs and how they would hurt young people seeking to buy their first home. Said Dann,

“[Russel Norman] argues that the introduction of LVRs would bring house prices under control, and that would give the Reserve Bank room to cut rates further and that would bring the dollar down. This seems a huge leap of faith.

“Putting rules around the size of deposits required to buy a house won’t bother those who’ve already got cash or have plenty of equity tied up in other properties, although it will certainly make getting on the property ladder harder for those on lower incomes.

“The powers of supply and demand are strong and where there is serious population pressure they typically prove stronger than regulatory forces.”

Dann also points out that China, a country where the state can do pretty much whatever they want, has only achieved limited success with LVRs.

Sure, LVRs would require banks to be a bit tighter with their money, but the big issue with the housing market is a lack of supply, something all the major political parties are making plans to address.

Home buyers – first timers and otherwise – have a form of self-regulation that will stop most from borrowing more than they can afford. It’s a little something called common sense.

It makes perfect economic sense to borrow money while interest rates are low – as they are now – but when rates increase, as they inevitably will, the strategy then is to do one of two things:

  • Save a bigger deposit and thus reduce the amount of interest paid, or
  • Fix the mortgage rate before it floats above their heads.

With some economists predicting mortgage rates to eventually rise up to 8-9%, prices will flatten and demand will dampen. Such is the way of the world.

The Reserve Bank is investigating several ‘macroprudential tools’, LVRs among them, and they’ll report back in March. Here’s hoping fairness prevails.

Over to you

So what do you reckon: are LVRs the way to go after all? What would you do to bring Auckland back into line? Is Auckland out of line in the first place? Or should we all just throw in the towel and go swimming?

Let us know your thoughts below or on our Facebook page.