Diana Clement

Your Money and careers writer for the NZ Herald

Diana Clement: Can-do attitude needed to save for house

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A little bit of saving can go a long way towards buying a house. Photo / Thinkstock
A little bit of saving can go a long way towards buying a house. Photo / Thinkstock

I can't. It's impossible."

I wish I had $1 for every reader who had ever emailed me saying it's impossible to get ahead financially.

A letter to the Herald editor a fortnight ago really riled me.

"With Auckland's median personal income at $41,600 and median house price at $490,000, it's difficult to see how a single person (or single-income family) could ever afford, let alone be approved for, a mortgage."

What got my goat about this letter was the cup-half-empty attitude. The difference between those people who get on and get ahead isn't always rich parents who paid for a good education or house deposit. It's usually the 15cm of grey matter between their ears.

If you think it can't happen, it won't. As one reader posted in response on the Herald website: "If you are using the excuse that you are on a low income, that is not going to change unless you change."

This cup-half-empty attitude stops people paying off their student loans and beginning to save. It's not worth it because it won't work.

Since when, I wonder, did a person on the median personal income expect to buy the median value house as a first home? The usual way to get on the property ladder is at the bottom and work your way up to the median house or above.

The letter writer from Grey Lynn found the suggestion that renters should buy property "offensive".

Every week in Auckland people do manage to buy their first homes. That doesn't just include the children of wealthy east Auckland types who are given the deposit on a platter by Mum and Dad.

That includes Maori, Pasifika people and even refugees who may arrive in the country with just hand luggage. The people who succeed in doing so ask themselves: "How can I?" They don't think "it's impossible".

One nzherald.co.nz reader said something similar: "This year I will be purchasing a property, it will not be because of my fantastically high income, or because of my startling intelligence, or any other excuse that people will make as to why they are any different from me - this year I will purchase a property, because I have chosen to."

In the past few years I've had the pleasure of interviewing people on ordinary incomes who have bought their first homes on meagre incomes.

Aucklander Tina Chan was one. While still at university Chan saved the deposit for her first property, which she bought and rented out, staying at home with her mother. As well as studying, she worked part-time at Vodafone, did cleaning and catering jobs, ran a small business and helped support her family who had come to New Zealand from Cambodia.

Chan was single and a bit of a superwoman. Another example that ordinary people can relate to was that of mother-of-three Dora Numia who'd grown up in rental properties and thought buying a home was a far-off dream. That was until her youngest brother bought a home and the other six siblings let out a collective "whoa".

With help from a mortgage broker, Numia and her husband Meke set a financial goal and eventually bought the property her mother was renting in Mangere. The process helped the family change its money priorities.

South Auckland-based mortgage broker Paul Richardson, of Roost Mortgages, sees real people on low incomes buy houses. He is amazed at the deposits some people are able to save on very small incomes.

It's not uncommon for Richardson's clients to take up to three years from first visit to picking up the keys to their home. When he first meets them many clients suffer from what Richardson calls "the South Auckland disease", which is debt.

When the reality is spelled out on paper in front of these first home buyers they are often willing to work at two or three jobs to scrape together a deposit.

Some of those clients make huge sacrifices to become homeowners. In order to save a deposit they may give up their entertainment costs, gambling, move back in with family, eat basic food, grow their own vegetables and in many cases give up smoking.

Richardson is a reformed smoker who has seen many clients give up the habit to get ahead financially.

He helps by going through their bank statements with a fine-tooth comb and talking through scenarios of how they can save for a deposit.

Many clients think they have no slack in their budgets to save. Invariably, however, there is evidence on their bank statements of unnecessary spending. "Eftpos is a wonderful tool to help you identify [unnecessary spending]," he says.

Richardson's clients aren't looking to buy $490,000 houses. Prices for starter homes in his neck of the woods are about $220,000. He estimates an annual combined household income of $50,000 would get a family across the line and into such a house. A 95 per cent mortgage on that property would then cost them $290 a week, which is cheaper than renting.

As one nzherald.co.nz reader wrote: "Lower your expectations, people, there are plenty of houses in Auckland for 300-350k. Your noses are just too high."

The hot-under-the-collar letter writer from Grey Lynn would point to the fact that most of Richardson's clients have two incomes. Someone with the "how can I" attitude might buy a property with a sibling or friend, or buy an even cheaper property than the above examples.

For instance, a two-bedroom unit at 54 Strong St in St Johns in Auckland is on the market for $135,000. It's leasehold, and the ground rent is $75 a week, due to rise to about $180, says agent Wayne Boberg of First National in Epsom. Wallace Wang, of Harveys Greenlane, has an 82sq m two-bedroom apartment in the Q-Central block for sale for much the same price. Apartments require a greater deposit, but a relatively low income can service the debt. The ground rent and operating costs on that apartment are just over $200 a week.

Some readers will squirm at the thought of living in an apartment, a leasehold unit, or living in St Johns. One even made it clear he wouldn't live in "a crap hole in Manurewa". Richardson points out that those people who do succeed in buying their first home often compromise on suburbs or the properties they buy in order to get a foot in the door.

Quite a few readers have commented that they moved to less desirable suburbs while saving a deposit. One said: "Rent a dump." Another added: "The fact is YOU choose not to move out of central Auckland where the rent is cheaper, because you don't want to compromise your lifestyle."

The point about this is that there are ways to save and make the numbers work. It just needs a change of attitude for the "I deserve it now" generation.

Here's a gross generalisation: I bet the same people who say it's impossible to buy a home in New Zealand wouldn't "waste" their money on KiwiSaver because the Government's just going to steal it anyway, or it's not guaranteed, or whatever the latest excuse is.

Yet Richardson is seeing family after family buy their first homes thanks to KiwiSaver. "They have never been able to save, so KiwiSaver has been a really excellent result for them."

The other benefit of KiwiSaver is that it really shows that small regular deposits add up. Those people who joined on day one and have contributed the minimum percentage of their income consistently since then have thousands of dollars in savings.

The point of this article is not that people should be buying houses. It may not be a good time. The point is that they can buy a first home if they choose to. An attitude transplant is more important than a pay rise.

- NZ Herald

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