The introduction of the loan-to-value (LTV) restrictions placed on banks when considering new leaders hit New Zealand hard. But the relaxation of the LTV ratio for those who want to borrow for a new build has seen a boom in the number of new subdivisions in Auckland.
The south and west city fringes of Auckland have seen a large rise in the number of new building consents being issued and new properties are being constructed at a rapid rate. QV valuer Bruce Wiggins said that “As there are no loan-to-value restrictions on lending for new building, this may account for the stronger interest in this sector.”
Home Buyers Build Rather Than Buy
Subdivisions in the west or south Auckland around Weymouth, Hobsonville, Takanini and Papakura are providing popular with people who want to build a new property instead of buying one. With the narrowing of the price difference between existing and newly built properties, many people with low deposits are choosing to build and get the exact property to suit their needs and tastes.
With the average cost of $2000 per square metre to build your own home, it is not a cheap option but one that provides multiple options. New home buyer Vanessa Nash purchased a home off spec that was already under construction. She recommends others do the same so they can choose the features, colours and styles they specifically want, rather than those of the vendor.
Is it wise to borrow more than 80% of the purchase price of a new build?
Even though you can get a mortgage to build a new property with less than a 20% deposit, it still may not be a wise financial decision. However the overheated market is forcing many to do just that, rather than compete for existing properties. With the effects of the recent property boom and bust still felt and remembered by many New Zealanders, should we wait and save larger deposits instead of taking advantage of the lower LTV for new builds?
A mortgage is a huge financial decision and taking out a larger one may have unforeseen issues down the road. Meeting with a mortgage broker to discuss all your options is the best decision you can take. They will lay out all your options and help you decide which option is best for you financially and help you decide if you should build new or buy an existing property.
No comments yet.