Well, we finally purchased a home.
Our situation was a little unique, in that we had been searching for about nine years and across three different countries as we were moving around for our careers. Whilst this was an on again off again search, it was still a very laborious process.
All in all, a very tiring process especially considering the uncertainty during lockdowns, inflationary pressures from government and central bank stimulus, and a rather expensive process when considering multiple payments to lawyers to review legal documents.
Having finally purchased a home, I feel there are some rather insightful experiences to pass on through this post. These are summed up into three points which are “Buy what you need, not what you want”, “Just do not overextend yourself” and “It is not about timing the market, it is about time in the market”.
“Buy what you need, not what you want” – When we approached this significant purchase, we were mindful that the options available to us were quite wide. We looked at lifestyle properties, five bedroom homes and two bedroom homes depending on what we were thinking at the time.
However, after some time we started to think about whether we are buying more than what we need for the lifestyle we currently live. Overall, we started to recognise that our home should be large enough for the family with a guest room, but not so large as to consume our whole weekend with cleaning and general maintenance. We also desired a home that we could add some personal touches to, and add some value over time. These considerations deleted a lifestyle block and the many new builds that were coming onto the market. In the end, we settled for a three-bedroom home with a small back yard with enough space for a garden and play area for our little one.
Ultimately, you do not need to hold onto a house for over ten years, and it may be the case that you either renovate as you own once you have some more equity or sell and then buy a new property – there is no need to get caught up in the whole forever home story.
Being clear on our needs better focused our search for the home that we want. This also reduced the chances of us spending more than we wanted to on a home, which leads to the next lesson.
“Just do not overextend yourself” – Whilst we were never looking to extend ourselves too far, the period of cheap interest rates certainly made this tempting. During a purchase process it was very easy to consider an increase in bid price when it was only going to add a small amount to the overall purchase price; “what’s an extra NZD50,000.00 when you are spending more than NZD1,000,000.00”. Given the sharp rise in house prices over the past few years, this was clearly a key driver for the market with many people simply paying more for a house because they could afford the servicing but losing sight of the actual cost price. Overall, we were very focussed on the purchase price of the home, and not just the monthly cost of the mortgage payments. We only wanted to pay for what we valued and not what others valued.
“It is not about timing the market, it is about time in the market” – Whilst this is largely true, the situation over the past few years made us very weary of fully buying into this mantra. According to the QV House Price Index[1], the average house price in New Zealand peaked in January 2022 at NZD1.06m, before falling to an average of NZD888k in July 2023 (a fall of around 16%). Very interestingly, from January 2020 average house prices were around NZD728k which shows how significant growth was from the start of the pandemic and peak prices (around 45% growth).
It is easy to get caught up in the moment. But sometimes it is best to take a step back and think whether this all makes sense. My wife and I had several moments like this, which ultimately resulted in a longer search period as we held back whilst others were caught up in the hysteria, but the benefit was being able to buy in a good location at a price below our target.
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