First-home buy­ers 'psych­ing

Horowhenua Chronicle - - OPEN HOMES -

First-home buy­ers may be psych­ing them­selves out of the mar­ket, ac­cord­ing to new re­search by OneRoof.co.nz and prop­erty an­a­lysts Valoc­ity.

Al­though first-home buy­ers made up the largest share of all new mort­gage reg­is­tra­tions in 2018, OneRoof found that there is still the per­cep­tion among Ki­wis that it is im­pos­si­ble to buy a house.

“The rapid growth in house prices in the last five years, es­pe­cially in Auck­land, has put groups who have yet to en­ter the mar­ket at a dis­ad­van­tage,” OneRoof edi­tor Owen Vaughan said.

“Would-be home­own­ers hear the talk about the lack of new homes and the large sums of money re­quired for de­posits and feel locked out, even give up.”

There are hur­dles: de­posits that the cur­rent gen­er­a­tion are re­quired to save are sig­nif­i­cantly higher than pre­vi­ous gen­er­a­tions needed, both in dol­lar sums and pro­por­tion of house value.

James Wil­son, di­rec­tor of val­u­a­tion at Valoc­ity says the nar­ra­tive that it’s im­pos­si­ble to buy a first home can stop po­ten­tial buy­ers in their tracks be­fore they even start, mak­ing it a self-ful­fill­ing prophecy.

But he says mort­gage statis­tics show 26 per cent of buy­ers tak­ing out mort­gages in Auck­land are first-time buy­ers, a lit­tle lower than the na­tion­wide share of 28 per cent.

``So first-home buy­ers re­main ac­tive within the res­i­den­tial prop­erty,” he says.

“But when we take a look at what they are buy­ing, to build a pro­file of the `typ­i­cal’ prop­erty the first home buyer is ac­quir­ing there are changes.”

Valoc­ity and OneRoof re­search shows that in the past year (to Oc­to­ber 2018) apart­ments have grown a whop­ping 62 per cent, flats by 13 per cent (and that’safter a 30 per cent surge from 2014/5 to 2017).

The anal­y­sis found av­er­age apart­ment prices of $631,000 for a floor area that still sits around 65 square me­tres, com­pared to an av­er­age prop­erty price across the whole Auck­land mar­ket of $915,000.

Around the coun­try it’s a dif­fer­ent story.

In Dunedin, for ex­am­ple, av­er­age apart­ment prices of $295,000 are not that far be­low to­tal mar­ket av­er­age of $310,000.

In Hamil­ton, Christchurch and Tau­ranga too, the spread is un­der $100,000,It is only Welling­ton where first home av­er­age of $660,000 is $200,000 more than apart­ments.

Wil­son says across all main ur­ban cen­tres there are prop­erty types that can be af­forded by first home buy­ers. He says the nar­ra­tive that “it’s im­pos­si­ble” is dan­ger­ous.

Re­search by Massey Univer­sity Fi­nan­cial Ed­u­ca­tion Cen­tre re­search in 2014 found that 21.8 per cent of the 2287 re­spon­dents aged 18 to 45 were not buy­ing be­cause of a lack of self-belief.

“The statis­tics don’t bear out the nar­ra­tive,” says Wil­son. “More than a quar­ter of new mort­gage reg­is­tra­tions are for first home buy­ers. So peo­ple who don’t buy into that nar­ra­tive [of it be­ing im­pos­si­ble] are able to ac­quire a house. In fact, first home buy­ers are one of the dom­i­nant par­tic­i­pants in many mar­kets across the coun­try.”

A sec­ondary nar­ra­tive that leads to buy­ers be­ing “psyched out” be­fore they save is that only those with fam­ily help can buy. The Massey re­search found that 71 per cent bought with­out fi­nan­cial as­sis­tance from fam­ily.

Vaughan says buy­ers are also psyched out be­cause a six-fig­ure de­posit sounds daunt­ing, even though salaries are much higher than those their par­ents and grand­par­ents earned.

Be­havioural econ­o­mist Anan­ish Chaud­huri, head of the Depart­ment of Eco­nomics at the Univer­sity of Auck­land says that it is not sur­pris­ing that nega­tive nar­ra­tives make first time home buy­ers more re­luc­tant.

Chaud­huri and col­league Ryan Green­away-McGrevy, a se­nior lec­turer in the depart­ment, point out that it’s “bloody hard” for first­time buy­ers to get on the prop­erty lad­der. But the nega­tive nar­ra­tive in the mix made things worse.

“For al­most all of us, buy­ing a house is the big­gest in­vest­ment of our lives in­volv­ing sig­nif­i­cant un­cer­tainty re­gard­ing cur­rent and fu­ture mort­gage rates as well as cur­rent and fu­ture in­comes,” says Chaud­huri. “It is well known that oPsa t f strug­gle with

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