Set the bar low to get on property ladder

By Kyron Gosse

I am a property investor who realised at a young age that the key to true wealth was best gained through property, not through working for someone else. I quit my high paying job working on oil rigs in Australia and returned to my home city of Auckland to use creative strategies and joint ventures to build my portfolio with the aim of being financially free before my 30th birthday.

What I've found is Auckland house prices are affordable: it's just your expectations that make them unaffordable.

House prices may be expensive, but that doesn't mean that they are unaffordable. The real problem is that we are looking at properties in areas that we cannot afford to buy them. Once again this doesn't mean unaffordable. It is actually illegal for banks to give you finance for a house you cannot afford. Everything is priced according to the market and if people didn't pay that price then it wouldn't be that price - it is as simple as that - the basics of economics. You and I wouldn't pay $100 for a block of chocolate, yet there are some people out there who could and do. This doesn't make it unaffordable chocolate, this makes it a block of chocolate aimed at a different clientele.

The problem with Auckland property however is that everyone in Auckland feels that they are part of that clientele because we are bombarded by houses every day; We drive past houses, we live in houses, we see them advertised in our magazines, our papers and our emails.

In fact it is pretty much impossible to escape the real estate market. As a result we see nice houses advertised, this starts pulling at our heart strings, there is a comment about zoned for such and such school and before we know it we have convinced ourselves that we must move.

My generation are a generation who believe they will be condemned to renting their whole lives because house prices are simply too unaffordable. People need to stop and look at what is more important to them, getting into their own house, or purchasing the house of their dreams; with a pool and ocean views and in zone for a good school and a spare room and so on. I think it's people's expectations that are holding them back from getting on the property ladder. You cannot expect your first property to be an amazing character villa in a city fringe suburb.

Now could be the best time Gen Y will ever see to get on the property ladder, Housing NZ are offering a grant, you can access your KiwiSaver to use as a deposit, interest rates are 5 per cent and banks are willing to lend up to 95 per cent, plus I believe there is a boom around the corner to give you almost instant equity.

Yet as a nation we seem to have forgotten our creativity. If you cannot get a loan there are many options you can take; rent to buy, instalment contracts, teaming up with a friend, getting a guarantor, looking in a different suburb, building a minor dwelling on the back of your parents place, in fact even subdividing your parents place, getting vendor financed, buying a home and income property, the list goes on...

Take the property I am currently looking at: I can't get a mortgage because I am self employed - my friend can, he doesn't have a deposit; I do. He can however get access to his KiwiSaver and the Housing NZ grant, but he doesn't know what to look for in a property - I do. We have found a property we are currently interested in; It is worth $560,000. (Approximately the same as the Auckland median house price) It has a downstairs flat and 4 bed rooms upstairs. If we were to rent out the flat downstairs and 2 of the bedrooms we would be lucky if we have to pay $25 per week each on all of the property's expenses.

It may not be a Remuera mansion and it may mean sharing our home with others for a few years, but $25 pw is sure as hell a lot cheaper than the $250 pw we are paying now, plus we will be able to capitalise on the coming boom.

The median house price may be high, but think about what the median actually means: half the houses are more expensive, half are less expensive. Out west and south and even around Panmure area there are plenty of houses around the $300-450,000 mark. Auckland houses are not unaffordable; you just need to change your high expectations.

* This opinion piece is not intended to give expert financial or property investment advice.

Kyron Gosse

- The Aucklander

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