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Planning key to changing financial outlook

The ‘haves’ and the ‘have nots’: Planning key to changing financial outlook for non-property owners

• Non-property owners twice as likely to be living pay cheque to pay cheque versus property owners
• 43% of home owners paying off mortgage faster than required
• 35% of non-property owners say they let their finances ‘take care of themselves’
• Nearly half of first home buyers plan on raiding their KiwiSaver for a house deposit.

The BNZ Financial Futures Research, released today, shows insight into the markedly different financial behaviour of people on both sides of the property fence.

Craig Herbison, BNZ’s Director of Retail and Marketing, says the research suggests home owners are more likely to be thinking long term about their finances than non-property owners, and this will have big consequences for their finances.

“Non-property owners were twice as likely to be living pay cheque to pay cheque versus property owners [extract 1]. More concerning is that one in three of those people say they spend more than they earn [extract 2].

“This is in contrast to property owners, for whom nearly half (43%) have enough discretionary income that they can pay more off their mortgage than required, even if it means making lifestyle sacrifices,” says Mr Herbison [extract 3].

Sixty nine per cent of people making lifestyle sacrifices to pay off their home loan faster, told BNZ they were cutting things they viewed as non-essential luxuries and treats in their life, such as new technology. 64% of people making lifestyle sacrifices said they were cutting their travel budget; 62% were cutting takeaways and dining out; and 52% were willing to make cuts on clothing, shoes and accessories [extract 4].

“It is encouraging that nearly three quarters of people with mortgages review the structure of their home loan regularly [extract 5]; especially as current interest rates are the lowest in a generation, which provides a powerful opportunity to pay off home loans faster than ever.

“Ideally we’d like to see this discipline in a greater number of non-homeowners, more than a third of whom said they let their finances take care of themselves [extract 6]. This is unlikely to set them up for the future they want and deserve.”

Herbison said there was a sense of despondency in non-homeowners:

“Almost 60 per cent say that buying their first home is not achievable in the next five years [extract 7]. One in five non-property owners do not aim to buy a house at all [extract 8].

“Despite this pessimism, two thirds of non-property owners told us they have the capacity to save money [extract 9], but one third confess they are spending more than they earn [extract 2]. So the missing ingredient is a commitment to saving.”

The research found that in the current environment, people realise there needs to be more than just personal savings contributing to a deposit.

Nearly half (47%) of non-property owners plan to raid their KiwiSaver funds [extract 8]. Others are looking to accept money from family, purchase cheaper property outside of their city, or use parents as guarantors or inheritance money.

Herbison said people wanting to enter the property market should heed the advice of those who have done it before, and think more broadly to develop their plan.

“What’s really interesting is that property owners are far more pragmatic. When we asked them how they thought people can reach their deposit, they often talked about three or four different sources.

“The majority of non-property owners in New Zealand agree that it’s a lot harder to buy a house in today’s market, compared to previous years [Extract 10]. But it also appears that the act of owning a home, or not, may also impact your optimism. We asked if it was the right time for people to buy their first home – 63 per cent of property owners think it is a good time, versus only 37 per cent of non-property owners,” concludes Herbison. [Extract 11].


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