Buying Your First Home It's Still Possible

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From Professionals Real Estate Group Auckland/Northland Region

Date March 7, 2007

Buying Your First Home It's Still Possible

Rising New Zealand house prices may make property less affordable, but real estate salespeople say that with an innovative approach and hard work, it's still possible to reach that first rung on the property ladder.

The Professionals Regional Manager for the Auckland/Northland Region Gary Murphy says a new trend has emerged among young first homebuyers. Many can't afford to buy their own home to live in straight away, but are not prepared to wait until they have a full deposit saved up to get into the property market.

Instead, these young people are pooling together with friends or siblings to buy a joint investment property, which is then rented out. This way, they are able to attain some sort of property ownership and realise capital gain, instead of watching house prices continue to escalate out of their reach.

"The gap is widening the statistics are starting to indicate that less people are owning homes," he says. "It's definitely harder for a young person to get into their own home, unless they are buying outside the main areas, so buying an investment property with friends is a great way for them to get started."

Diane Osborne, Principal of the Professionals office Osborne Realty in Waiuku, has been in the industry for 40 years and believes it's always been difficult to get into a first house. She says some old-fashioned hard work, careful budgeting and self-restraint is what's required to get ahead.

Some banks and lending institutions will lend between 90 per cent and 95 per cent of the house price, and some up to 100 per cent if buyers have good incomes, says Diane. She advises first homebuyers to open a savings account with a recognised institution and to save regularly for six months buyers who are able to demonstrate a reliable savings record often have little trouble securing that first mortgage.

While there are few properties in Waiuku priced below $300,000, it's still possible to find the odd bargain in outlying areas of Auckland for $235,000. Buyers should take their time and may need to lower their expectations. Remember, she says: that first house is unlikely to be the one the buyer lives in forever, but it will at least be a solid foot forward into the property market. Diane estimates most buyers move on from their first home within three years, and says people should be prepared to make compromises with their first home.

"Some first homebuyers want everything the best street and the best house with all the upmarket fittings. A modest house will at least get you in the market."

About half the first-time buyers Diane deals with receive help from family to get into a home. This isn't always a lump sum of cash. Many parents who may not be cash rich, but do have a freehold house, are using equity in their home to raise a mortgage. There is usually an arrangement for this to be paid back by their children and it's one way parents can help out with the up to $30,000 deposit that's often required to get into a house in the Auckland area.

Steve Hall, Principal of the Professionals office Panmure Realty says there are still suburbs in Auckland that offer good value for money and that a deposit of $25,000 or in some cases even less will secure a modest home in Panmure or Mt Wellington.

His best tip for first-home buyers is to have finance approved before they start house hunting because offers that are not dependent on raising finance are more appealing to sellers and can save money in the long run.

"I had some customers in here a fortnight ago with a $20,000 cash deposit and pre-approval from the bank who were able to get a $310,000 house for $287,800. They had the money and the house was sitting empty, so they were in a very strong position," he recalls. "If you're looking to buy your first house get to the bank and get the cash!"

Though the Auckland property market is likely to remain strong and prices are unlikely to fall, some creative thinking and a targeted savings programme combined with hard work and compromise still make the kiwi dream possible.

ENDS

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