Stable market offers first-time buyers chance to save deposit

First-home buyers have an opportunity they’ve not had for some time – waiting and saving could leave them thousands of dollars better off.

Data from real estate agency Barfoot & Thompson show that Auckland house prices in January were at the same level seen in January 2018, although the number of sales was higher.

ASB economist Jane Turner said prices were likely to remain flat for the time being.

For years, first-home buyers have dealt with rapidly rising prices. As they tried to save a deposit, prices moved ahead, leaving them facing a bigger mortgage with each year that passed.

But now, stagnant prices provide more opportunity to save.

Assume that a first-home buyer earns $70,000 a year, and puts 8 per cent of their pay into KiwiSaver, along with their 3 per cent employer contribution and $521 a year from the Government.

If they do this for six years, they will save $46,223. But if they can add another year of saving, their balance will be $54,555.

That extra $8332 could pay off in the long run. If a borrower took out a $650,000 mortgage at 5 per cent interest, they would pay $1753 in repayments a fortnight and total interest of $489,310.

But if they used the extra savings to reduce the mortgage to $641,668, they’d pay only $1730 a fortnight and $483,038 in interest.

Even better, if they kept the payments at the original $1752, they’d pay $468,891 – an interest saving of $14,147. Not bad for a year’s extra saving.

Infometrics chief forecaster Gareth Kiernan said it was something for buyers to weigh up.

‘‘It probably means that they can be less rushed ... and wait until a property they like comes up at the right price,’’ he said, rather than worrying about being priced out of the market.