First-home buyer? Here’s your playbook
KiwiSaver and HomeStart will help but the open-home grind is still essential, writes Susan Edmunds.
It’s been tough to be a first-home buyer in recent years. With house prices leaping ahead by double-digit percentages, and lending restrictions on banks, many would-be purchasers have found their deposit savings goal increasing faster than they could keep up.
But with the rate of house price growth now slowing, and predictions values could stagnate in many parts of the country over the next few years, buyers may have an opportunity.
ANZ’s data shows 22 per cent of sales across New Zealand during the three months to December 2017 were to first-home buyers, from 17 per cent three years ago.
Here’s how to make the most of it.
Mark Collins, chief executive of Mike Pero Mortgages, said more than 80 per cent of all first-home buyers now used KiwiSaver in some way to help them buy a property.
In the bigger centres, KiwiSaver savings were part of the deposit, alongside help from parents or other savings. But in regional New Zealand, people could save enough through KiwiSaver to not need any other help.
Nationwide, the price of a ‘‘lower-quartile’’ house – that’s a house that is more expensive than only 25 per cent of the rest of the properties in the market, is about $350,000. In Auckland, it’s $650,000.
If would-be homeowners were buying as a couple and needed a 20 per cent deposit, they would need
$35,000 each outside Auckland and
$65,000 each in Auckland. A 25-year-old earning $60,000 with $5000 already in a balanced KiwiSaver fund could save $40,000 in the next five years if they increased their contribution to 8 per cent of their pay. A couple earning $50,000 each could save
$44,000 if they did the same. A 35-year-old earning $85,000 who had been in the scheme since its inception could save $100,000 if they were putting aside 8 per cent.
Blair Vernon, managing director of AMP, which has launched a new calculator to help New Zealanders use KiwiSaver for property purchases and retirement savings, said many people did not realise that home ownership was in reach with the scheme.
‘‘It’s always been challenging to save for a deposit, but because of KiwiSaver more New Zealanders already have a level of savings, that might not otherwise exist, which they can now use to get into the property market.
‘‘While withdrawing retirement savings might seem at odds with the outcomes of a scheme like KiwiSaver, most people we speak to regard home ownership as a key part of their overall retirement proposition, and before we had KiwiSaver we had nothing comparable that allowed people to experience the value of saving.’’
Between October and December last year, there were 8463 withdrawals – $184 million – from KiwiSaver for a first home.
Consider what help you can access
If you meet income and house price grant criteria, which vary around the country, you can access a HomeStart grant of up to
$5000 per buyer (up to $10,000) for an existing house or $10,000
($20,000 for a couple) if you’re buying a new property. In the last quarter of last year, 4403 HomeStart grant applications were approved. There was $2.4m paid out to Auckland buyers and
$2.9m in Christchurch.
You may also qualify for a Welcome Home Loan, which means you will need only a 10 per cent deposit.
Collins said there were other options for people who wanted to borrow 90 per cent of the property’s purchase price, even if they did not qualify for a Welcome Home Loan.
Adviser Campbell Hastie, of the
Go2Guys, said borrowers who wanted a 90 per cent mortgage would need to have a good savings record, solid and reliable income and good account conduct. ‘‘No unarranged overdrafts.’’
He said it was important not to have too much debt, too, such as car loans or consumer finance deals. ‘‘The less of that the better, make it nil if possible.’’
Temper your expectations
Don’t expect to buy the house you’ll live in for the rest of your life. Vernon said it was important to have realistic expectations of that first property.
‘‘For your average first-home buyer, a million-dollar property in Ponsonby is probably not an option and may not be desirable, but a townhouse in an up-andcoming suburb is likely going to be a more realistic option. Everyone’s situation is unique and we all have varying levels of spending, savings, debt, income and different ideals when it comes to housing. When you’ve made a decision to get on the property ladder, it’s important to carefully assess your options, set your goals and then stick to a plan and take practical steps to help you achieve them.’’
But buy well
If you know you’ll want to move on in future, you need to consider the potential to resell your property. Look for houses around new infrastructure developments, with easy access to transport links and amenities such as schools and shops. You might find a threebedroom house has more resale potential, even if at the moment you only require two bedrooms.
Hastie said transport links were most important in big centres. ‘‘If there are plans for a road to go through but it hasn’t yet, you can take a punt on that.’’
He said it was important that buyers did research.
‘‘Trade Me makes it easy these days but you have got to get in the car, get out there and smell the house. There’s nothing like doing the open home circuit to understand what your money buys. It’s hard yards but you’ve got to do it.’’