Now's a good time to buy a house

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Buying a house this year is “fundamentally a good idea” as inflation looks set to rise around the world, according to Tower Investments chief executive Sam Stubbs.

Friday, January 21st 2011, 12:00AM 2 Comments

by The Landlord

"We think that owning or buying a house is a good idea. Most people buy a house by taking out a mortgage. Having a mortgage on a house with inflation around the corner is not a bad thing."

Speaking at Tower's inaugural quarterly briefing he said inflation would be "one of the dominant themes for the investment world in 2011."

Despite predictions of interest rate rises as competition for borrowing increases, Stubbs said he believed mortgage rates would remain relatively stable.

He said banks remained committed to mortgage lending as their lowest risk form of lending.

"We've been through the global financial crisis (GFC) now, if banks wanted to exit the mortgage markets in New Zealand they've had plenty of opportunity but they chose not to. They've chosen to withdraw from commercial and industrial [lending], that's why so many small and medium enterprises are hurting."

Tower's fixed interest manager Andrew Lance said that post the GFC banks realised they needed a more stable funding base and that the higher deposit rates, needed to attract retail funds, gives banks "a margin to absorb mortgage rate rises."

The Tower head of property, Brent Buchannan, said the combination of historically low interest rates and inflation would see "property come back to the fore."

He said Auckland in particular stood to benefit.

"We have net immigration every year, and 80% of immigrants want to live in Auckland," he said.

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