Kicked in the teeth

Property

First-time buyers relying on family to get into houses; It's the only way in a 'crazy rising market', says Auckland mortgage broker

17th Jul 13, 10:24am by David Hargreaves

<a href="http://www.shutterstock.com/">Image sourced from Shutterstock.com</a>

First-time house buyers are already relying on family to help buy properties and will "absolutely" be kicked in the teeth by the proposed move from the Reserve Bank to limit high loan to value (LVR) lending, according to an Auckland mortgage broker.

Sue Tierney of Sue Tierney Mortgages told Marcus Lush on RadioLive that the RBNZ's planned "speed limits" on high LVR lending were "going to have an impact" on first time buyers. "It is going to hurt them."

“They are already relying on family. It’s the only way in what’s a crazy rising market. And even worse, they are putting mortgages on their parents homes.”

Tierney did not believe the RBNZ move, which has already attracted huge political criticism, would make house prices cheaper or have any impact on the Auckland house market.

“I don’t see that it’s going to at all because if you go and attend auctions out in the suburbs the biggest percentage of people buying are all foreigners, they are not New Zealanders.”

“Not at all. And the crazy thing is is that it’s not the whole of Auckland that’s busy at the moment.” She said the South Auckland market was much quieter.

Foreign buyers of houses would not be affected by the moves, Tierney said.

“We don’t even see them. They are completely cashed up. They are just not even in the market. They are a different world to us."

She said the high LVR policy was likely to increase overseas ownership of NZ housing.

“That’s what is really scary. It bothers me. And when do our New Zealand home owners, when do the first home buyers ever get into the market if they are having to compete with overseas money?"

Tierney said that property investors were, similarly, not likely to be affected by the new policy.

“They are leveraging off other properties. They don’t have any deposit. They don’t need to. It’s not going to make a bit of difference to that market at all.”

Tierney agreed that both the banks and the would-be buyers may end up getting more "creative" in a way to get around the LVR limits.

“Absolutely that’s something they could do. There’s always creative lending. That’s exactly what’s going to happen. We are going to go back to the old days where second tier lenders come in and get involved. It’s just going to make the whole process even more expensive.”

We welcome your comments below. If you are not already registered, please register to comment

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

30 Comments

by Andrewj | 17th Jul 13, 11:05am 1374015903

Just getting all the suckers onboard before the plug gets pulled.

by MikeM | 17th Jul 13, 11:11am 1374016295

I don't think all foreign investors are "cashed up". How many Chinese investors, for example, are coming over here with money borrowed in China? Some of them must be leveraged to the eyeballs.

by General HubHub | 17th Jul 13, 2:29pm 1374028163

Indeed MikeM. But when you are borrowing at 0.5% from the Chinese Central Government bank EXIM Bank, you can buy an Auckland property of $700k for $523 a week and rent it out for $1000 a week... you aint doing too badly baby! Means you can get that second house for free... Multiply that exponentilly and wow, a hot hot Auckland market! NICE work if you can get it, huh? Tie that in with a shortage of housing etc and you just cannot lose, ever!

by General HubHub | 17th Jul 13, 7:18pm 1374045514

Very interesting points kimy... Would be great to get some of that action, huh? Am waiting to see how my China immigration application is processing!

by raegun | 17th Jul 13, 12:03pm 1374019419

You are totally missing the point, if everyone has to move down a suburb or two from where they may otherwise be, what happens to the displaced people who already live there? That doesn't solve the problem it just moves it around

by Matt in Auck | 17th Jul 13, 8:09pm 1374048595

It's pretty sad Kimy if middle income, first home buyers have to buy in the quasi-slum suburbs of south Auckland. Young kiwis are getting rooted with the exorbitant cost of living.

by Matt in Auck | 17th Jul 13, 10:55pm 1374058517

You will struggle to buy a good 3bed house in mangere for less than late 300s. What a joke. I built a new house in a middle range but central and up and coming adelaide suburb for 400k last year.

by retireby50 | 18th Jul 13, 8:36am 1374093419

Thats 467k here in the kiwi peso and Adelaide is the equivilent of Dunedin so suggest you dont compare a lamborghini to a skoda

by KH | 18th Jul 13, 9:29am 1374096558

Yes. Auckland is a Skoda. Given the wailing and knashing of teeth we hear at volume here on 'Interest'. Whenever I go there, the locals seem poor. No cash in pocket at all.

by kiwimm | 18th Jul 13, 10:46am 1374101177

Adelaide population = 1.26m, GDP per capita at PPP = US$29,900

Auckland population = 1.38m, GDP per capita at PPP = US$31,200

Incidentally, Skoda and Lamborgini are both owned by the same company and the cars share some components.

by kiwimm | 18th Jul 13, 11:40am 1374104400

It is the availability and quantity of relevant jobs that drives where people choose to live. Why else are so many young Kiwis leaving Auckland and moving to the non-hubs of Brisbane and Perth?

by iconoclast | 18th Jul 13, 11:52am 1374105137

recipe for unhappiness - Gold Coast - non-hub of Brisbane - watch this - significant part is in the last half - lotsa kiwis getting panned http://aca.ninemsn.com.au/article.aspx?id=8691277

by KH | 17th Jul 13, 11:37am 1374017858

As for Sue Teirney: Read this.

http://www.stuff.co.nz/business/money/6121135/Broker-escapes-conviction

by raegun | 17th Jul 13, 12:01pm 1374019282

Doesn't mean she isn't right in this instance, though, does it?

by Kate | 17th Jul 13, 12:03pm 1374019403

property records show that the Sue Mihakis Trust, of which Tierney is a trustee, is the ultimate owner of eight residential investment properties, four in Auckland and four in Christchurch. All appear to be heavily mortgaged

And so given she might go bankrupt if the portfolio was force sold - the Judge decided to dismiss without conviction.

So now the judiciary is propping up the ponzi scheme.

Unbelievable.

by puketepapa | 17th Jul 13, 1:41pm 1374025260

[Comment deleted due to potential libel reasons, Ed. Here's our commenting policy here - http://www.interest.co.nz/news/65027/here-are-results-our-commenting-po…].

by Henry_Tull | 17th Jul 13, 1:45pm 1374025519

Possibly they, and the lending banks that may pay her think she/ or background history such as hers reported, all makes one a fit and proper person to be a mortgage broker.....

Note: poor credit choices/decisions may have significant life impacts for unfortunate borrowers...

by puketepapa | 18th Jul 13, 12:38pm 1374107895

David Chaston:

Clearly understood - "We will remove comments we believe may be defamatory or libellous"

Surprised you considered my comment to be "potentially libellous"

The established facts of the matter were, the person referred to

(a) was travelling under two names

(b) lost the court action brought by an employee, which resulted in

(c) the person then "phoenixing" their company to avoid creditors

(d) was sentenced to 300 hours community service (without conviction)

(e) The FMA subsequently accepted and registered them as a "financial advisor"

My question (Is this another David Ross fiasco?) was aimed at the FMA

I did not intend to impute that the "person referred to" was another David Ross

by Colin Riden | 17th Jul 13, 6:21pm 1374042081

If DC wants a website with credibility then he ought to impose some standards on the integrity on his contributors.

by KH | 17th Jul 13, 11:40am 1374018035

What is it about New Zealand. Apparently it's always the governments fault. In this case the Reserve Bank making a minor move.

Maybe first home buyers have been kicked in the teeth by a crazy house prices.

by Henry_Tull | 17th Jul 13, 1:21pm 1374024116

Thx for the insight in to the mind of a mortgage broker.....

We understand most mortgage brokers are paid by the mortgage lender....

We understand the real estate agent is paid by the vendor...

We understand the valuer's fee is paid by the mortgage lender....

We understand that lenders mortgage insurance is paid by the borrower...

We understand that the Govern/taxpayer and now deposit holders promise to make the mortgage lender good...

Q: From whom is the kick in the teeth being dealt?

We think the sale of credit facilities, or loans, needs be conducted by advisors (bank or otherwise) in the same way financial assets are marketed. Therefore concepts such as:

Know your customer

Duty of care - suggesting the best loan for clients circumstances (read true financial position)

The accurate and truthful completion of loan and credit applications.

The full and accurate discloure of all fees and commissions (including trails) paid by the mortgage lender.

Professional indemnity insurance.

Asif.....

by Alan at DUX | 19th Jul 13, 9:31am 1374183081

i cannot comment on how some brokers and especially bank staff work but the principles you listed of how you expect an adviser to act are exactly how an adviser is supposed to work under the new regime (and most of us did before we had to as well).

Nothing in your list is a surprise to me or something i have not been doing for the past 10 years. but that is the key difference between an adviser and a broker/sales person.

by andrewebrown | 17th Jul 13, 8:11pm 1374048708

So out of interest to see what the feedback is 1. WHY do we allow foreign investment in our property market without the investor having to INVEST THEMSELVES into our culture or country; wars have been fought for land rights and we (as New Zealanders) or more to the point our government deem it justified to sell our most prized possesion "OUR L:AND" to all and sundry. 2. Surely it would be a wise longterm objective to ensure that financial investment in our country coincides with personal investment in NZ being residency or citizenship. 3.I'm new to this and I'm a proud northland New Zealander from maori / european descent so take it easy. 4.In most island nations YOU CANNOT buy land unless you are in the know YOU can only lease, why dont we adopt the same in NZ - become a resident OR citizen of our beautiful country you can buy land IF NOT you can only lease.

by retireby50 | 17th Jul 13, 8:40pm 1374050421

All you hear is everyone moaning about the first home buyer being displaced but in Auckland buying property at the moment is not for the faint hearted. The metrics are all wrong - shortage of listings / lack of Council foresight stonewalling "good" developements within the RMA which actually provides new REVENUE for the councils and yet the values increase on their own (driven by cheap money). Feel the the real home owner is about to get whhaaaalloped with increased rates to provide for the future and corrected valuations. The LVR's will slow down the speculators then CGT will follow to address the rest then the first home owner will get their day - patience little chick your time will come.

by raegun | 17th Jul 13, 8:55pm 1374051352

Patience little chick? And wait for what - to become KFC? What we are talking about in case people forget is people having HOMES - HOMES you know those things, were the heart is. All I bloody well see is lots of heartlessness, this is not NZ any more

by steven | 17th Jul 13, 9:19pm 1374052744

If you go back a ways renting was far more normal, ppl still provided homes for their children.

Indeed some ppl in work rent, they have kids, they are all happy just like the ones with mortgages.

So its not a case of a home, some of it is an expectation put in by marketing / peer pressure IMHO.....and from what I can see and hear an expectation that they can make money so the Q is complex.

This is a huge financial commitment that at todays prices makes questionable sense....oh and you know that financial stress is one of the big causes of a relationship breaking down?

Heartlessness and not NZ anymore, yes you are generally right there....I think rogernomics has been a disaster overall....

regards

by raegun | 17th Jul 13, 9:32pm 1374053572

It is hardly a home when you can't even hang a picture on a wall without someone's say so, it's hardly a home if you can't paint and wallpaper and change the carpet if you want, it's hardly a home if you aren't allowed to dig up the back yard for a vege garden, it's hardly a home if you can to find yourself given notice to quit before anthing in it is ready to eat, it's hardly a home if you aren't allowed to have a pet in it. Do you want any more reason why renting is a crap way to have to go - these days, not those days when most of the things I described would not have applied

Oh and not to mention, being able to choose whether or not you can smoke in your rented "home".

by retireby50 | 18th Jul 13, 8:32am 1374093172

One of the things that amazes me is how "most" renters trash yes trash landlords and the property. Occasionally a renter comes along who is house proud and looks after the joint. If you were a renter the wanted to paint & paper (in something other than purple) then most landlords would jump at the chance. Choose to smoke in yr new home ? When you get yr home one interest rate hike and you wont be smoking as the discretionary income you had wont be there. Are you sure you are prepared for home ownership.

by raegun | 18th Jul 13, 10:22am 1374099774

Actually I tossed up whether or not to add the smoking bit, because as an avid ex smoker of some years now, I cannot stand the smell of it anywhere near where I would want to live, in fact, I would turn around and walk out of any house that had obviously been smoked in, if I were a prospective buyer of it, but having said that, I decided to put it in, because at the end of the day, if you own your home and you want to stuff it by smoking it, that's your choice.

But I digress, yes there are trash tenants but now more and more we are seeing regular folk, working who in another era would have been able to purchase already, forced to rent maybe for a long time, with the added downer that they will likely not have paid the mortgage off by the time they retire

I will finish by saying that children do much better in a stable environment and the uncertainty of renting does not provide that anywhere near as well.

You are clearly a landlord and have a vested interest in people continuing to not afford their own homes so I will take your comment with a grain of salt

by retireby50 | 18th Jul 13, 11:05am 1374102312

Its always interesting to hear first home owners B & M over other peoples due diligance which is what many first home owners do. If first home owners want it all they have to be commited ... yes everyone wants more than they've got its a fact of life. Its the doing part that many fake. Lets face it everyone would like a cliff top beach front property the reality is that 2 % of the population have it and generally it comes later in life. The key point for first home owners whether high income or low income is MAKE A START as you can not race if you dont start. There is nothing to say if you rent in Auckland you can't buy in Tauraunga or Whakatane. Then at worst if nothing else is acheived over 20 Years in Auckland retiring in Tauranga will be satisfying. Worst case scenerio if it turns to custard SELL BEFORE IT BITES when that is only you can tell.