Paul Ejamme - Finsol Financial Adviser

06/03/2023

Finsol Property Market Update

It's been a rocky start to the year with the Auckland floods and Cyclone Gabrielle wreaking devastation on Hawke's Bay. These recent weather events will have a negative impact on the economy, creating supply shocks that may further increase inflation and the OCR. So what does this all mean for home buyers/owners? We've provided insights for First Home Buyers & Property Investors. Please click on the below link.

It's been a rocky start to the year with the Auckland floods and Cyclone Gabrielle wreaking devastation on Hawke's Bay. These recent weather events will have a negative impact on the economy, creating supply shocks that may further increase inflation and the OCR.

28/02/2022

MARCH MARKET UPDATE

We're living in turbulent times, and the recent event of Russia invading Ukraine has created further uncertainty and fear in the market.

The OCR (Official Cash Rate) has increased by 0.25% basis points. My prediction was it would rise by 0.5% basis points due to the current hyperinflation in New Zealand.

The hyperinflation problem is a global issue due to COVID, which stimulated super low-interest rates and excess money supply. As a result, most countries are suffering the aftermath. Goods and services are becoming unaffordable, and interest rates are rising to balance the equation. Over the next one to three years, interest rates are predicted to increase to 5 - 6%.

If inflation stabilises and gradually drops to 3%, you'll see rates hold/drop progressively to balance the equation.

The banks have already factored the recent OCR increase into their short-term fixed rates. We shouldn't see too many short-term fixed-rate movements; however, banks will increase rates further if inflation rises.

If you're a home loan client of Finsol, we have already structured and staggered your loans to provide some protection against rising interest rates. The typical approach of some banks and advisers to fix for one year has proved detrimental for some clients. Those who are now looking to secure longer terms are facing an almost 100% increase in their interest rate.

What does this mean for first home buyers and investors?

First home buyers will start getting some good bargains, especially in the bigger cities - property prices are predicted to drop by 8 to 10% in the next couple of years. Auctions have reduced, and listing amounts have dropped to attract buyers.

Though there will be deals to be had, first home buyers will face stricter lending guidelines due to the recent tightening of all major banks. However, we've seen a few lenders open their doors for below 20% deposits to purchase existing homes.

Property investors will either take advantage of the market downturn or hold tight and ride the wave depending on their overall cash flow position. Some investors may sell due to negative cash flow (from the effects of increased mortgage repayments from rising interest rates and not using interest deductibility).

As always, investors or first home buyers should contact their financial advisers for support and advice to reach their financial goals.

DISCLAIMER: The opinions conveyed in this post are for general educational purposes only to provide information about the financial services industry. This information is not intended to provide specific financial advice or recommendations for any particular insurance, home loan, or investment product. You should not use this article to make any financial decisions, as I cannot assess your situation without thorough consultation. I highly recommend seeking professional advice from one of our qualified financial advisers.

19/12/2021

END OF YEAR LENDING AND MARKET UPDATE

There have been a lot of lending changes over the last few months. Banks have tightened up lending for first home buyers and property investors, and a few banks have started to withdraw above 80% approvals.

CCCFA (Credit Contract and Consumer Finance Act) guidelines officially kicked in December 2021 and have halted lending for many potential borrowers. Some might argue that the changes for CCCFA are overkill, yet others are saying they're designed to protect consumers.

In the property realm, auctions started to slow down: 50% of properties listed to sell via auction are not selling. We've had a few buyers purchase securities below market valuations. The tide is turning a bit, and buyers are starting to get good deals.

Will the property market slow down in 2022? The answer is yes; however, it may not last for long. The changes to the CCCFA and rising rates have contributed to the market slowing down.

If the banks make the cost of borrowing high coupled with stricter guidelines, borrowers will drop, and demand should drop. However, we've seen a lot of appetite for property development lending with lots of demand in that segment.

Don't be disheartened if you're a first home buyer. Sit tight; your time will come to find the right property. If you're a property investor, do your numbers before committing. Working with an experienced home loan adviser will make your lending and property purchasing journey smoother.

10/10/2021

The OCR rose by 0.25% basis points last week - be prepared to have your existing floating/revolving credit facility rate rise.

Also, fixed rates across different terms have all increased by 33% to 40%. From here on out, it's vital to number-crunch and budget for the rising costs of borrowing.

Existing rental properties will have diminishing interest deductibility from 01/10 over the next four to five years. New build rentals will have the ability to claim interest deductibility over a 20-year loan period. However, building supplies are at an all-time high and are difficult to secure.

The CCCFA (Credit Contracts and Consumer Finance Act) has been officially rolled out to the lending world. What does this mean for you as a borrower? The banks will get a lot tighter with lending to protect consumers from excessive debt and make sure they are not borrowing for things they may not be eligible to pay back in the future. Moving forward, all banks will pay closer attention to your account conduct and spending habits.

If you are an investor or a first home-buyer, please reach out to your mortgage broker or bank manager for guidance regarding borrowing capacity and lending strategy in the future.

05/07/2021

HOME BUYING UPDATE

Wondering about buying a new build vs. an existing home? Click through for more details.

25/05/2021

MAY MARKET UPDATE

A lot is happening out there in the property market at the moment - things have slowed down slightly, but not drastically. There is still a shortage of homes and plenty of eager buyers waiting to pounce.

There are fewer investors out there buying existing properties, but many of them are keen to buy new builds due to the new laws introduced by the government.

GOOD NEWS FOR FIRST HOME BUYERS

On the lending front, a few of the main bank players have rolled out favourable lending criteria for first home buyers. I'm surprised how much they have relaxed their conditions.

Now is an excellent time to speak to a mortgage adviser if you're a first home buyer. Take action while the banks are on your side.

NEW BUILDS

ASB is offering a floating 1.79% variable rate for construction loans for new home builds or land and build packages. This is the most competitive rate available at the moment, and again, we're surprised they've rolled this out.

It seems that ASB is keen to do its part to rectify the housing supply issue in New Zealand by encouraging people to build new homes. This rate is available for both investors and occupiers.

Learn more here: https://www.goodreturns.co.nz/article/976518622/asb-launches-1-79-variable-rate-for-new-builds.html

As always, reach out if you need some guidance.

02/05/2021

Timing is everything.

I meet with a lot of first home buyers who have been turned away from the bank because they're not quite ready for a loan. Rather than telling them to come back in six or twelve months, we get to work.

Learn more about our unique process in my latest update:

https://www.finsol.co.nz/home-loan-timing/

Superior home loan advice to help you into your sooner and pay down your debt faster » Finsol Mortgage Brokers » Napier, Hawke's Bay

11/02/2021

WHY ACCOUNT CONDUCT MATTERS

I recently worked with a self-employed client who owns a successful vehicle repair and tyre business. The company itself is doing well, but the clients account conduct wasn't the best.

Account conduct is your spending behaviour and activity, and it's something that the banks scrutinise closely if you apply for lending.

The savings track record was impeccable with this client, but they didn't understand the importance of account conduct. Before they approached me, they went to the bank to apply for a home loan, and they were declined.

They then went to a mortgage broker that didn't understand how to work with financials, and they were declined again.

After being referred to me by their accountant, it was time to get to work.

Their accountant and I spent a month putting together a plan, and I went back to the bank that declined them initially and got the loan approved.

It is a MUST to have good account conduct in place, even if you're a diligent saver. If you're in a similar boat to my client above, get someone in your corner to tidy things up and help you make an application.

28/01/2021

We've had a busy start to the year with a huge influx of home loan enquiries and applications - the market is still booming!

Check out my January update for more info over on the Finsol blog.

https://www.finsol.co.nz/paulys-property-update-january-2021/

23/11/2020

Buyers need to understand it's a seller's market at the moment. However, it's not all doom and gloom.

I wanted to share my recent experience purchasing a property at auction in the Auckland market. Before I found my new home, I spent a year and a half researching and trawling online listings, so I had a good understanding of the market, areas I liked, and what I wanted in a house.

I found that desirable properties that had been listed for a week or so already had a huge amount of interest - some I contacted had already had fifteen groups through. I didn't even go near them, because I knew I'd be outbid in an auction situation.

My goal was to secure an affordable property in a good area - so I decided to try a different approach. After scouring listings on TradeMe, I noticed quite a few had "overseas seller" in the description. In general, overseas sellers want a fast sale as they need cash flow, so I decided I had to act fast for the right listing.

After actively looking for a good two to three months, I found a property I liked - from an overseas seller - and got in touch with the agent the day it was listed. I viewed the property with a building inspector in tow (I paid him his hourly rate), and when he gave me the thumbs up, I made an offer on the house.

All on the same day the listing went live.

The agent accepted my unconditional pre-auction offer, and the auction was brought forward by two days. On the auction day, there were no buyers, and I was successful in purchasing the property.

The agent said afterwards that because I took action so quickly, they didn't even have an open home. And while there were other buyers interested, their finance couldn't be completed fast enough, and they didn't have unconditional approval.

At auction, properties are selling high because there are lots of buyers in the room. If you make a fast offer, you might just edge out the competition.

In conclusion, if you want to find a home:
1. Be organised and patient while you wait for the right opportunity.
2. Be proactive if you want a property.
3. Act fast and beat the competition.
4. Have your finances and pre-approval in order (unconditional is ideal.)
5. Get an experienced Mortgage Adviser in your corner.

29/10/2020

PROPERTY MARKET UPDATE

Something I'm getting asked a lot at the moment is if property prices will continue to rise. I'm also getting asked if interest rates will continue to decrease.

First off, a little disclaimer: I'm not a crystal ball - no one is - and all views are my own. However, I have a unique insight into the property and home loan market due to the nature of my job. In fact, I live and breathe it.

My analysis of the current property market is purely based on supply and demand. In general, New Zealand has had a lack of homes available. Pre-COVID, the property markets in some of the bigger NZ cities like Auckland and Wellington started to stabilise slightly, with supply exceeding demand.

However, post-COVID, with ex-pats returning to purchase homes, and buyers having more disposable income available due to being unable to travel, the demand for houses has exceeded the supply all over the country. In short, the market is booming at the moment.

Alongside the above, the banks are offering lower interest rates and a relaxed approach towards LVR, or your investment property equity position.

The best approach for many buyers right now is to wait for the right opportunity to buy a property. Take your time. There are still good purchases to be found, but you need to be patient.

Interest rates will most likely stay low for the next year or two, and I predict that the property market will also be on the rise for the next year or two. It's unlikely to slow down just yet.

If you already own a property or properties, it's worth keeping in mind that your savings and any extra disposable income may be better directed towards your current debts.

It's an excellent time to refinance your home loan at a lower rate and a shorter term to allow you to pay it off faster. Sometimes this makes far more sense than substantially increasing your debt and rushing into buying another property.

What are your thoughts on what the property market will do over the next year or two? All opinions welcome.

15/10/2020

I come across challenging home loan cases quite often at Finsol. Not long ago, I worked with a self-employed medical professional who was having zero luck securing a home loan. This client owned multiple businesses with a number of shareholders, making his financial situation complex, to say the least. He had been rejected from the bank and had attempted to engage two other mortgage advisers to no avail.

The application was anything but straightforward. It took considerable preparation and time going back and forth with his accountant before we could submit anything.

Credit to the accountant, who was incredibly helpful throughout the whole process; it was refreshing to work alongside someone so helpful and proactive. Together, we presented the application and financials in the right light to the bank and managed to get the loan approved.

In complicated situations like this, mortgage advisers and accountants MUST work together to get a good result for the client.

If you're self-employed, I always recommend talking to your accountant before starting the home loan application process, and always team up with an experienced mortgage adviser.