Planning for the long term

Ruapehu Bulletin, Volume 14, Issue 655, 24 September 1996, Page 9

Planning for the long term

"Owning your own home is an investment in your future." Real Estate Institute vice president, Max OliVer, is a firm believer in the importance of home ownership. "It' s critical for your future security to own your own home," he says. He refutes the argument that it is better to rent a house than buy. " If anyone listened to that formula in 1990 and, as a result, had decided not to buy their own home, they would have substantially far less net worth today than if they had bought at that time." Max Oliver says the figures speak for themselves. "When someone comes in to see me telling me they want to rent a

property to live in, I always point out to them that they are helping a landlord to pay off a mortgage." As an example of property appreciation he quotes a unit bought for $72,500 nine years ago worth $230,000 today. "That's an increase of $160,000, or put another way an average annual capital gain of $18,000 and, in the meantime, the rental has been paying off a mortgage. "Leaving aside the fact that that particular property is in Auckland, we have seen such a steady increase in property values across the country over the last 1 0 years that, if there is an option, it is always better to buy than to rent." Max Oliver says that property values have always been cyclical. "You need to take a longer view when buying property. Y ou have to be prepared to ride out the highs and lows, but in the long term you cannot better property as an investment. "The simple fact is that property always goes up and down in cycles. I' ve been in real estate 33 years and, in my experience, property has always increased in value by 100 per cent over a seven or eight year cycle." He says the biggest hurdle for most people is to buy their first home. He stressed that anyone considering purchasing for the first time needs to establish a good savings pattern through budgeting and being sensible. "However, it' s no harder today to save than it was when

I started back in the mid sixties. Y ou just have to commit yourself to saving and perhaps give up a few pleasures. "Back in the sixties and early seventies^ first home buyers were accustomed to obtaining a first mortgage for about two thirds of their total financial needs. This was usually accompanied by a second mortgage at a substantially higher interest rate and sometimes even a third at punitive rates." Today, with the current competition between lending institutions to attract the mortgage market, it has never been easier to borrow. Turn to Page 10

Planning for the long term

FROM PAGE 9 "The Real Estate Institute has been tracking trends mortgages over the last five years with its monthly surv of lending institutions. One of the strongest trends we' noted is the increase in flexibility of terms and loans lenders compete for the mortgage market. "It's possible to borrow as much as around 90 per ce and most institutions will riegotiate on the type and term loan." The advent of mobile managers has also made financii arrangements even easier. "The mobile manager will come out with you to look a property and will give you advice, or a decision, either* the spot or within 24 hours." As a first step, he advises all potential home buyers talk to a member of the Real Estate Institute. "They'll be able to advise you about long term housii trends in the area you'd like to live in. You should al establish a good relationship with your bank and get the to work with you." He also considers now is a good time to buy. "House prices have steadied in the last few months ai should remain that way, I believe, until Christmas. It's very stable market to buy on." He says that when buying you should not look at makir short term gains on property, but rather at the long ter capital retum. "Look at the richest people in the world - they alwa; own property. It is a fact that there is only so much proper available and the population continues to increase, : therefore property must appreciate in the long term."

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