Property Market NZ – Buying a House in New Zealand 2022

1.   Sort out your finances

COVID-19 has made many people aware that they don’t have access to large savings or funds. The new lending rules have also made it more difficult for consumers to obtain lending. Many of the main banks require a higher LVR (Loan value ratio) and higher incomes to service the loans, this has resulted in many consumers being unable to obtain loans or their pre-approvals being significantly cut. This has resulted in some consumers turning towards non-bank and second tier lenders. The key take from here is to have a strong understanding of your finances and your lending abilities before embarking on the buying a house process. It is best to get in touch with a reputable mortgage advisor. If you don’t have one, we can put you in touch with a mortgage adviser.



2.   Your deposit and or security

In order for a lender (i.e. a bank) to loan you monies, they require the borrower to have a deposit of monies. In exchange for the loan, they will take security over the house that you have purchased by registering a mortgage over your property. If you already own your own home, you may have sufficient equity in your property to use as security for another property. To obtain a loan the lender will require you to have your own deposit, this does not have to necessarily be your own monies either. It may be worth considering family succession planning or doing a joint venture with someone who has equity but they may not have the serviceability. You may be able to get onto the property ladder sooner than anticipated. The key take from here is to seek independent legal and taxation before combining any assets and ensure you have the best ownership structure.

3.   Due Diligence

Whenever you purchase a property it is extremely important that you do your own due diligence. It is alarming the amount of purchasers that don’t do this. Especially if you go to auction as if you’re the successful bidder the contract is unconditional, we recommend that you get one of our Christchurch property lawyers to look over your auction review package before going to auction.



4.   Buying a property in Christchurch

If you’re looking at buying a house in Christchurch, and it was built prior to the 2010 and 2011 Christchurch Earthquakes you will need to ensure the house is structurally sound. The EQC documents will need to be reviewed. The vendor’s agent should have an understanding of the property’s EQC history. You will also need to check that you can obtain insurance for the property. Before attending auction or signing a sale and purchase agreement we recommend that you allow one of our property lawyers to review what you are going to sign.

5.   Exit plan 

Many people don’t consider this aspect of selling the property they are purchasing. This raises many issues such as should it be owned by you personally or your family trust? What happens if you have a job relocation will you sell your home or rent the property out? If you lose your job, will you be able to afford your mortgage repayments? If you forced to sell the property, would you make a loss or break even? We have also seen unfortunate circumstances where home owners were relying on the equity in their home and sold their current property. They intending on purchasing another property that was cheaper than the home they just sold, but were unable to obtain lending. This has resulted in them needing to find temporary accommodation. The key note from this is to have your finance sorted and not rely on the fact that you have equity in your property.

Looking at selling or buying a house? Get in touch with one of our Christchurch property lawyers who can assist you with the buying a house process in New Zealand.