Is it a good time to buy?

Well, a very interesting day yesterday - the Reserve Bank has slashed the Official Cash Rate (OCR) by 1% - fabulous news to home owners or people looking to enter the market as a couple of the leading banks have already reduced their fixed rates in light of the OCR drop; namely ANZ, ASB & Sovereign; the others will be sure to follow suit in due course.

So, the question that remains on prospective purchasers minds is.... Is it a good time to buy?

My first question to anyone who asks me this is - how long are you looking at holding this new property for? The answer to that is almost always "long term", and this generally means; 5 years plus in which case; what is going on right now in the current market will have been forgotten by then and potentially a good capital gain would have been made on the property purchased.

I want to have a look at the facts and also want to have a look at the speculation around this topic of whether or not buying now is a good idea:

FACT

• Rates have decreased quite significantly recently making money cheaper than it has been in a while
• Property prices have dropped
• Banks are tightening up criteria for higher lending deals i.e 90% plus – BUT, it’s NOT impossible – 100% deals are even still being approved.
  I strongly believe that if you are going down the 100% route; it is all in the way you structure your mortgage; 100% mortgages are absolutely fine if you buy an appropriate property and if you structure the mortgage in such a way that equity can be created in the shortest space of time.
• Buyers market is still very apparent.
  Meaning - first time buyers are not shoved out of the way like they would be in a booming market - they have time to make a comprehensive decision and act accordingly.

SPECULATION

• Property prices have bottomed out or have yet to bottom out
  Nobody really knows the answer to this question – are they going to continue on a downtrend or are they just going to stay stagnant for another 12-18 months?
• Banks will stop lending altogether for a period of 18 months
  I don’t believe this at all.
• Banks will call in existing mortgage debt
  I don’t agree with this at all.
• Interest rates will fall further
  Who knows, it seems to be looking like they will but have you got a crystal ball I can borrow because I dont' think anyone actually knows.

The Facts outweigh the speculation in that if property is something you want to get involved with, then it actually isn’t a bad time to be snapping up some bargains; but I must stress the importance of a long term hold.

What I am trying to get at with all this takes me back to my original question – how long are you in this for? If it is long term and let’s face it, property is usually and should be long term; then depending on the type of deposit that you have and your overall situation; you would structure the mortgage in a way that the risk of purchasing property in the current market is negated.

Credit Companies, School System or Individuals - who is to blame for credit debt?

There was a documentary on New Zealand's 60 minutes last night about a girl who had racked up $70,000 in credit debt on a $35,000 salary. While driving to work this morning listening to the radio, the presenters were taking calls on this topic and specifically referring to this documentary, and discussing how easy it is to obtain credit in this country, and the problem we face with ‘Generation Y’, that is fast becoming ‘Generation Debt’!

My question is – whose fault is this?

The credit companies for practically giving away credit and just making it too tempting, with 24 month interest free deals & 12 month deferred payments?

The school system for not educating kids on how to save and spend their money?

The parents of the Individual racking up the debt?

Or

The individual who racks up the debt?

I want to explore each a little....

Credit Companies
Why the HELL should the credit companies be at fault? Isn’t it their business intention to lure people in and sign them up on these deals so they can grow their business books? So in that case; my hats off to them, as they are obviously doing a good job! It is not their problem that people over extend themselves! However in saying this, I do agree (albeit after a bit of a debate); that the credit companies could have a bit more of a tighter criteria on who they lend to and how much they lend - perhaps a more stringent way of working out borrowing capacity.

School System
God knows I didn’t last at school myself and happily bailed out at the end of 6th form; but I honestly think a little bit of the responsibility does lie within the schools. In my opinion, perhaps a little less on the pointless poems & algebra, and a little more on budgeting, banking, realistic expected salaries and actual case studies on general living & expenditure, wouldn’t go astray!

The Parents
Ok, some of the responsibility lies here also of course. Are parents teaching their kids about money? Who knows, but surely NZ kids are learning the value of a dollar – it’s not rocket science after all.

The Individual
I was shocked while listening to the radio, that everyone ringing in and also the presenters, were blaming everyone (mainly the credit companies) but themselves. Is it just me or does that seem ridiculous!? Aren’t we all adults? Do people not understand that if you tick something up – you eventually have to pay for it?

So, in my opinion, whilst there is a little bit of blame on the school system & perhaps the parents; if you as the individual have excessive credit debt – isn’t this nobody’s fault but your own? The credit companies are just doing what they do best – lending money – it is not, I repeat, NOT their fault your credit debt has got out of hand.

I am not saying I’m perfect, I have credit debt myself – but I only have myself to blame for that.