Bruce Morris: Is now a good time to buy?

The million-dollar houses and apartments at Kohimaramara on Tamaki Drive on Auckland's waterfront. Photo / NZ Herald

Ever get confused about those endless stories on whether it's a good time - or a bad time - to buy a house?

Sometimes the theories seem to change day by day, depending on who's delivering the message. But who do you believe?

Real estate agencies are in the business of selling properties, so it is no surprise they will look for a shaft of light in any gloom.

Economists, on the other hand, will peer deeper, with less emotional attachment and make a judgment on all the information before them, not just the bits they like.

Then there are the various commentators who look at all the data, glance at history, flip a coin on which way the economy is going and hold up a wet finger to the breeze.

The least discerning segment is the biggest of them all, home owners themselves - where detachment and good judgment aren't always obvious. But the confidence (or despondency) they show is the surest sign of all just where the housing cycle sits.

Four or five years ago the property boom conversation lasted from entree to coffee. Right now it might come in at cheese and end at cracker. More likely, it won't even raise its head.

So what does that tell us - that now is not a great time to buy? It's a complicated question, impossible to answer with a straight "yes" or "no". Really, the answer depends on you and your "motives".

If you are looking to invest in residential property to produce a retirement nest-egg, think carefully about your options. Despite a general slide in values since the market peaks of three years ago (down around 5 per cent before taking inflation into account), no one would suggest this is a brilliant time to buy.

Statistics tell us that, overall, our house prices are still on the high side, especially in the big cities - among the world's most expensive when compared to household income, with nothing on the horizon to suggest wage rises will improve the ratio and help create a fresh housing cycle. Only the very optimistic can see house prices going anywhere in real terms over the next two years - and they certainly could drop further. Add the influences of the budget tax changes, economic uncertainty, wary banks, declining migration, low rental yields, rising interest rates and the hassles of being a landlord - and, well, term deposits are looking good.

Of course, there will be exceptions and professional landlords with decent equity in their properties will box on. But none of them will regard this market and its immediate prospects as cheery in the short-to-medium term and, without decent capital gain, the numbers don't stack up for new small-time investors.

What about the rest of us, though - those out there who want to move to a bigger (or smaller) home, better suburb, different town? Or the first-home buyers who have been biding their time?

If your vision is one of quick profit before moving on up the real estate ladder, forget about it unless you get very lucky. Better to bide your time and get a bigger deposit because, unlike four or five years ago when prices were moving month by month, time is on your side.

And if you're the kind who frets over whether you got a good price, slipping into despair as values dip further, you may feel more comfortable keeping your money in the bank. When real-terms capital gain is so uncertain, it's hard to mount a convincing economic case favouring mortgage over rent.

But for the great bulk of us buying and selling in the same market, or searching for a first home, perhaps no time's a really bad time.

Who doesn't want a place to call home, to enjoy the sense of pride in owning your own patch - growing vegetables in the backyard, sticking in a sandpit for the kids, painting the walls what colour you like?
While it would be nice to pick the bottom of the market and ride a boom, making hay is not as important as making a home.

Most of us want a place where we are not at the whim of a landlord - a refuge where we can close the gate at night and forget about the office and the world, chip away at the mortgage and watch the trees grow.

Our homes may be part of a strategy to chart our way in life - to get to retirement in one piece, enjoy twilight years without great financial worry and perhaps leave a bit behind for the kids.

Home ownership forces us into a sort of de facto savings scheme, where every dollar we trim from the mortgage - even if the final target 15 or 20 years down the track seems almost mission impossible - contributes to our personal wealth.

Yes, we might be able to grow richer by renting and shovelling every spare dollar into the bank, because the cash difference between answering to a landlord or the bank can be substantial.

But if we're renting, how many of us have the discipline and the will to stash away the gap? Sacrifices are made in buying a home (certainly that first home) but the same pressures often aren't there for renters.

Unless you have unusual restraint, the lattes, movies, restaurants and weekends away will gobble up much of the difference. You'll enjoy the moment but cash-strapped home-owners will have their day.

So we return to the core question: is now a good time to buy?

Not especially, is probably the right answer, even though it's certainly a buyer's market. But if you have secure income and a decent deposit, a willing bank, can handle the mortgage and spend the time to research and buy wisely - there seems no reason to hold back.

Just remember one thing: the idea is to make a home, not a killing.

* Bruce Morris, an Auckland journalist, is a former deputy editor of the Herald and editor of the Bay of Plenty Times.

* From the New Zealand Herald's quarterly 'Property Report' - a guide to house prices and great places to live.