Get the best of banks’ geniality now

The January market update of the leading Real Estate Agency Barfoot & Thomson says, “House prices remained consistent in January but the rental average set a new bench mark.”

What does this mean?

There is an acute shortage of rental properties in Auckland, particularly around Central Auckland. Investors are not buying houses to rent because of recent tax changes. Sellers are not in a hurry to sell and can hold.

Mortgagee sales are therefore few and far in between.

But there are some natural and compulsive situations (such as a death in the family or moving overseas) where houses must be sold.

Good houses in good locations, priced reasonably, sell quickly.

In fact, it is opportune time for first homebuyers to hunt for a suitable property, everything appears to be in their favour.

Interest rates are low and the Reserve Bank of New Zealand has indicated that these will remain low for at least another nine months.

Although the market is not flooded by good properties, there are some available.

While there may not be huge appreciation year-on-year basis in good suburbs, property value is not likely to go down in the long run.

Therefore, instead of paying rent and living in substandard rented houses, it would be better to enjoy living in your own home.

Your rent would be a waste, and if you pay mortgage instead of rent, your home will gradually become your own.

Location determines value

In good suburbs, even residential property investment can fetch good rental income and make the investment a cash flow positive.

Therefore, even if a property does not appreciate fast, you would still be getting good return. You must compare the cost and the rental income and decide.

Business owners should also make good use of cheap finance available. With loan portfolio in the housing sector on the decline, banks are keen to lend for any viable business proposal.

After all banks are in the business of lending to augment their income.

I have seen a huge change in the attitude of bank managers during the past year.

They are now desperate for business.

While considering your loan application, banks want to see the larger picture that would include your assets, liabilities, income, experience and capability of running business, the type of business you plan to buy, its financial sustainability and whether you have the capacity to meet unexpected financial stresses.

It is always good to discuss your plan with an experienced mortgage broker who understands business and commercial lending well and can organise funds at the best terms in the market.

If you go to one bank, you will get a reply but a broker knows the lending policies and products of most banks and can negotiate the best for your benefit. 

Suresh Sharma is Director of Cherry Mortgage Solutions based in Auckland. His personal disclosure statement is available on request. He can be contacted on 021-827575 Email: cherrymortgage@xtra.co.nz Web:  www.cherrymortgage.co.nz

Disclaimer: The above article should be taken only as a guideline and not as personal advice. Mr Sharma and the management and staff of Indian Newslink absolve themselves of all responsibilities or liabilities in this connection.