Is waiting for your forever home a better buying strategy?

Mortgage broker John Bolton talked two sets of first home buyers out of buying a property recently - and not because they couldn’t afford a mortgage.

The Squirrel mortgage company founder says his reasoning is that house prices aren’t going up the way they were so when people do buy they need to make sure they are purchasing a house they will want to stay in for a long while because selling is so expensive.

“In a market where house prices aren’t constantly going up the last thing you want to do is buy and sell a property in a short period of time because the transaction cost of selling property is quite high.”

Costs include the many thousands of dollars paid to the real estate agent, plus the lawyer’s fees, plus the costs of the building inspection and LIM report, to name a few.

While low interest rates have improved affordability and have pushed up house prices, prices won’t keep skyrocketing, Bolton says.

“I think the reality is house prices are going to be pretty flat for a very long time," he says.

“If you take the high transaction costs into account the question really is ‘are you better to buy something you’re not overly happy with now or wait a little bit longer, stretch yourselves a little bit further, and get something you’re going to be really happy with for a longer period of time?'”

Bolton says he’s a big fan of either waiting a bit longer or stretching your resources to get a home you love.

He asks people desperate to get on the property ladder to think about where they want to be in three or five years time.

For example, one set of first home buyers he talked out of jumping into the property market had wanted to buy a house before they headed overseas.

“The problem is, as I said to them, when you come back to New Zealand are you going to still want to live in that house, and the answer’s probably no," he says.

“When they come back they’re probably going to be ready for the next step so why buy now? Why buy something that ultimately you’re not going to be happy with and you’ll sell again in two or three years time?”

For those who fear if they don’t buy now prices may rise so much buying will be less affordable in a year’s time, Bolton says that probably won’t happen and there are always trade-offs.

Even if prices rise a bit he doesn’t expect they will go through the roof again anytime soon -but on the other hand with housing, like everything in life, you have to make compromises.

“Sometimes we find people who have spent years looking for the perfect property but it’s a bit like looking for the perfect partner, you know? They don’t exist.”

Conversations Squirrel has with people are about goals and not always about the housing market and interest rates, he says.

“One of the big things we end up talking to first home buyers about is ‘is now the right time for me to buy?’”

And while waiting for a house they like might be the right plan for many people, there are those who buy with the intention of renovating and selling which can be a brilliant strategy if you know what you are doing and have the time and energy to go through with it, he says.