First home buyers offered 100 percent finance deal
First home buyers and young professionals struggling to get onto the property ladder are being offered the ultimate ‘leg up’ – with an inner-city apartment owner and his bank willing to put up 100 percent finance to approved purchasers.
The ‘no deposit’ deal is being offered on three apartments in downtown Wellington’s The Wakefield apartment complex on the corner of Wakefield and Taranaki streets – with a view to expanding the opportunity to a wider audience when the first three residences sell out.
The bulk of the finance has been arranged through a bank current floating rate of 5.6percent, while the remainder will be secured by a second mortgage fixed for five years at 7.25percent underwritten by the building’s owner Waterloo Residential Ltd.
Waterloo Residential Ltd managing director Donald Stott said the company had taken the unusual step of arranging 100percent finance in an effort to reinvigorate a lack-lustre appetite for apartment sales in the capital.
“Wellington’s inner-city apartment market has been somewhat subdued over the past few months. Simultaneously, many first-time buyers or young professional couples are finding bank funding increasingly more difficult to source as concerns over the European sovereign debt crisis remain unresolved,” he said.
Mr Stott said Waterloo Residential Ltd had leveraged its longstanding relationship with one of the ‘big three’ consumer banks in New Zealand to create a funding mechanism for first-time and no-deposit buyers.
“Our bank has taken a long term view of rising real estate values in the capital – maybe not over 2012 in the short term, but certainly in the medium to long term. With rising values, comes the consequence of rising equity levels by property owners.
“This display of confidence by one of the country’s major banks is exactly the sort of positive indication the wider property market is looking for.”
The latest Roost Home Loan Affordability Index for December 2011 calculated that at current income and house price levels, it would take an individual some 9.6 years to save the 20 percent deposit required by most banks to secure a home.
“Essentially the median income for the typical buyer is not high enough to buy a median priced house - even with a 20 percent deposit,” the Roost Home Loan Affordability Index noted.
“Affordability has generally been improving since December 2009 as house prices have flattened out and interest rates have fallen, although there has been some deterioration in recent months as house prices have firmed again.
“However, they (some first home buyers) may find that a lower-quartile priced house is affordable.”
Mr Stott said the home affordability imbalance was a sad indictment on low wage and salary levels in New Zealand. He said it was unfortunate that many purchasers were finding their home buying options confined to lower socio-economic suburbs in the city’s outer limits.
“By removing the requirement for a 20 percent deposit, we have brought home affordability within reach of many who may otherwise have been paying rent for the best part of five or six years. We are meeting the psyche of Generation-X who want everything ‘now’ yet are in many cases unable to immediately fund that desire to buy their first home even though they may be on good salaries,” Mr Stott said.
The three Wakefield apartments on offer through Waterloo Residential Ltd’ offer are being marketed for sale by Bayleys in a tender process closing on March 22.
Bayleys residential salesperson Liz Gamble said no price indications had yet been linked to the trio of one, two and three-bedroom apartments - although a two-bedroom/two bathroom unit in The Wakefield blocksold for $467,500 earlier this year.
“To our knowledge, the Waterloo Residential/Wakefield 100 percent home loan offer is the only one of its type in Wellington. The potential to avert years of hard saving is already proving a magnet – particularly to potential buyers aged in their late 20s/early 30s, and we are working with several interested parties by analysing their personal financial status with a view to getting them into a new home,” Ms Gamble said.
Latest figures from the Department of Housing and Building show the median weekly rental for a single bedroom CBD Wellington apartment is $360, while the median weekly rental for a two bedroom apartment is $495 and the median weekly rental for a three bedroom apartment is $570.
By comparison, the cost of servicing a $400,000 loan over 20 years with no deposit at the current floating rate is $609 per week – including principal repayments. At these levels, young owner/occupiers letting out rooms to flatmates can cover the cost of mortgage repayments.
The art-deco style units within the refurbished Wakefield building have sizeable bedrooms overlooking Wakefield and Taranaki streets, high stud ceilings, and large bathrooms.
Waterloo Residential Ltd bought The Wakefield building in 1990 and in 2004 spent $5million upgrading the individual apartments. The eight-storey character site is not on Wellington City Council’s list of earthquake-prone buildings.