Now's a good time to buy a house

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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Comments from our readers

On 23 January 2011 at 12:51 pm Miles said:
If you look only at inflation and interest rates, the bank would be correct. However there is more to the housing market than banks, inflation and interest. If you buy a house now at near asking price, you may find the market falls that 30% everyone has been talking about. But by the time REINZ are able to acknowledge the fall, it will be all over. Average prices are being artificially held up now by the glut of higher priced properties distorting the market average. These sellers are the remnants of the recession who can no longer hold out. When all those high price distortions are sold over about the next year or two, the average will reassert to a normal curve. At that time the average will drop like stone down a cliff. How far is anyone's guess but closer to 3 times salary than 6 times rings a bell.
Don't trust your bank to tell you when to buy anything. They need you paying more interest. That is not in your interest.
On 24 January 2011 at 8:13 pm Crack3rs said:
Very good and honest opinion. Since the market has already hit it's peak there is only one direction for it to go and it is down.
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