My Auckland housing market story

The Auckland housing market appears to be bubbling along quite merrily at the moment. I did the numbers a few weeks ago and worked out we would be much better off paying gobs of money into a low-rate variable mortgage than we are renting. Obviously, time is the enemy as rates will surely head up, so all the better to get into a house as soon as possible and start piling on the cash and building the equity while money is relatively cheap. At the same time, the interest in our bank deposit had shrunk each month by more than half, amounting to a huge pay cut over the past year.

We want to pay a house off in less than a handful of years, so we opted to jump in at the lower mid-range on the North Shore. While $350K to $450K could get you 2 or even 3 homes outright in parts of south Auckland, on the North Shore you'll have to settle for just the one. In Auckland city proper you won't get much of a house at all for the same money. Maybe a passable 2 or maybe 3 bedroom flat...though the shoe boxes can be had fairly cheaply.

Last year, we could take weeks to not make up our minds. The houses weren't selling in any hurry. May / June '09 has been a very different story. We spent a couple of weeks chasing a handful of worthy houses only to find that things had accelerated considerably. The last two we were interested in - around $375 to $400K - went in barely a day.

Last week, we lifted our game, sharpened our focus and moved like lightning to make an offer on a lovely 5 bedroom home in Birkdale with a full size section. We got it for a lot less than the capital valuation. Half the borrowed sum is to be variable rate and will paid off in two years. The other half is fixed-rate at 6.09% for two years and we will roll that over into a variable mortgage, in whole of in part, when the time comes....and pay it off as fast as we can. Two more years or less.

These days, it makes a lot of sense to keep the debt as low as possible (if you must have any at all) and pay it off as fast as possible. At the same time, if inflation takes off, we have an asset that will appreciate. Having said that, the government's policies look set to keep downward pressure on house prices through rising unemployment and lower wages for those still in work.

Whatever. I'm feeling affirmed today as Bernard Hickey says now is the time to fix those mortgage rates.

Dunnit!