Top Scoops

Book Reviews | Gordon Campbell | Scoop News | Wellington Scoop | Community Scoop | Search

 

The Antidote To House Hunting Woes

As a 20 or 30 something, you would be forgiven for feeling like you’re stuck between a rock and a hard place; rent takes a significant portion of income every week, making it impossible to save for a deposit for your own place that gets larger and larger every year. It’s not the smashed avocado’s and latte’s, nor is it a lack of desire. The articles in the Herald and Stuff about the 23 year old buying her third property are an extra kick in the guts until you read later down the article, she ‘received a leg up from her parents’.

Real estate agencies seem to be selling a record number of properties each month, implying there are more and more properties being sold, however, none accessible to you. The affordable and aspirational end of the property market are drastically undersupplied, meaning first home buyers are competing with buyers that have already built up significant equity and cash reserves over time, for property that as a whole, is of an overall poor standard.

You’d also be forgiven for feeling down after finally scraping your deposit together, finding the perfect place for your first home, getting preapproval from the bank then going to an auction where the opening bid is higher than your absolute maximum price (for the 4th of 5th time). You consider if the city you’re in is the one for you.

*

The above was the reality for myself, and still is for most of my peers - I’m 23 years old and purchased my first property at the end of last year. The way I purchased mine was different to the traditional model described above that worked for my parents, however demonstrably won’t work for my peers. Income to house price ratios were sitting at 4x-5x 40 years ago, with Auckland now nearing closer to 10x.

I work for Du Val Group, NZ’s largest suburban apartment developer in their Capital Partners division, so my job is to find the money to finance and build over 500 properties at a time. Prior to this I worked for Westpac Bank in the head office in Credit Risk and Lending; I started on the phone helping people with loans and credit card applications, working my way up to assess the bank’s risk tolerance for lending on residential property. I am very fortunate in my working career to have had a look ‘behind the scenes’ of finance and property in New Zealand and have picked up some valuable insights along the way.

My first insight is that price is not the problem. Being of the millennial generation (just), I don’t make friends saying this. Price is a symptom of market conditions, and at the moment, the market is undersupplied, especially in the aspirational end where first home buyers shop. This is economics 101, price will increase if demand increases at a greater level than supply, until an equilibrium is reached. Most of the tinkering with LVR’s, taxes and other fiscal and monetary brakes to stymie price creep have drastic unintended consequences that can make it even more difficult for my generation to get on the ladder. I have written a further article on this here.

The next insight is a prevailing lack of knowledge. The scenario painted above is the standard model, especially as real estate agents are incentivised to let properties run at auction, knowing there is upwards price pressure based on constrained supply. I bought my property Off the Plans from Du Val along with my partner and another friend in October last year. ‘Off-the-Plans’ purchasing has been around for a while, however isn’t given much media attention nor strong market attention. I chose to purchase off the plans for a few reasons, mostly around bringing certainty to my property journey.

Buying off the plans meant that we purchased a brand new, 2 bedroom, fully furnished (beds, TV, whiteware etc.) freehold apartment in the heart of Mount Wellington for $650,000. This apartment won’t be built ready for me to move in until mid-2022. During that time, I expect the value of the property to have gone up through natural appreciation. As this was our first home, we were eligible to receive the home start grant from the government agency, Kainga Ora, where for a new build we received $20,000 unencumbered towards our deposit - this again is not widely known. We were required to pay a 10% deposit to secure the property off Du Val which meant that after the $20,000 grant, we now needed to come up with $45,000 or $15,000 each. Suddenly the deposit required had shrunk from a big daunting $130,000 to a tangible $15,000. This $15,000 included our kiwisavers, so after each accessing the funds available there, we each only needed to put a further few thousand dollars towards our deposit and, Bam! just like that we had a property.

We had brought certainty to our journey by knowing what we bought and what it cost us, and we now had a goal to work towards, each further dollar we save could go into the equity of the property when it comes time to settle in 2022. We had completely circumvented the traditional model, we got to choose the unit that suited us best, didn’t have to deal with a real estate agent and best of all, didn’t have to watch our dreams slip through our fingers in an auction room. Our property will be warm, dry and brand new. It is in a good location and is perfect for us as younger working professionals, with little to no maintenance required. I also know that by buying a new property, I am supporting a developer bring more stock to market, which will ultimately mean we can sooner redevelop old, leaky, cold housing stock. While this is not necessarily our dream home, that doesn’t matter, it’s our first home and we can at least make a start with something that is a huge improvement on an older, colder, leakier home.

Had I not had the work experience both at Westpac and at Du Val, I simply wouldn’t have known this path existed. This is not taught at school and with media focused on sensationalism and stories about how hard it is and how bad our lot have it - which is certainly true in part - it is very hard to find stories such as mine that show an alternative to the norm. I have written this article in the hope that I may shed some light on the benefit of buying off the plans for first home buyers in particular.

For those looking to buy off the plans there are a few things to look for in the developer, most importantly, the track record. I chose to buy off Du Val after only working for the company for 2 months, so I lacked the benefit of experience. Du Val had delivered over 1,000 units when l bought and has plans for another 1000 rolling each year. It hadn’t all been smooth sailing, with one project delayed fairly significantly, however because they had 5 other projects rolling through at the same time, this wasn’t an issue - the scale of the business gave me the confidence to make my personal investment with them.

There are a number of developers across the country who offer the option to buy off the plans and if you find the right person to work with and the right company to buy from, it can be a massive help on your house hunting journey.

© Scoop Media

 
 
 
Top Scoops Headlines

 

Reese Erlich: Foreign Correspondent: U.S. Capitol Insurrection As Seen From Abroad

In the wake of the white nationalist mob takeover of the U.S. Capitol and Trump’s pending second impeachment, I contacted journalists and activists overseas to get an idea of how the rest of the world currently views us.... More>>


Ian Powell: Health Restructuring Threatens Patient Voice

The opportunity for public voice is vital for the effective functioning of New Zealand’s health system. Inevitably voice boils down to the accessibility quality of comprehensive healthcare services for patients both at an individual treatment and population health ... More>>


Boris Johnson At Sea: Coronavirus Confusion In The UK

The tide has been turning against UK Prime Minister Boris Johnson. Oafishly, he has managed to convert that tide into a deluge of dissatisfaction assisted by the gravitational pull of singular incompetence. Much of this is due to such errors of ... More>>

Binoy Kampmark: Denying Assange Bail

History, while not always a telling guide, can be useful. But in moments of flushed confidence, it is not consulted and Cleo is forgotten. A crisp new dawn can negate a glance to the past. Having received the unexpected news that Julian Assange’s extradition to the United States for charges of breaching the Espionage Act of 1917 and computer intrusion had been blocked by Justice Vanessa Baraitser, his legal team and supporters were confident. All that was left was to apply for bail... More>>


The Conversation: The Numbers Suggest The Campaign For Cannabis Reform In NZ Will Outlive The Generations That Voted Against It

Like Brexit in the UK, cannabis reform in New Zealand fell into an age gap — given time, a second referendum would probably succeed. More>>

Gordon Campbell: 22 Short Takes On The US Election

Finally, the long night of Donald Trump’s presidency is over. To date, the courts have been given no cause to conclude that the exhaustively lengthy counts of those mountains of mail ballots was anything other than legal. Stacking the US Supreme ... More>>


 
 
 
 
 
 
 
 
 
  • PublicAddress
  • Pundit
  • Kiwiblog