Lawrence Watt joins first-home hunters to see how far he can stretch $550,000 in Auckland's suburbs.

Prime Minister John Key reckons Kiwis are going to have to get used to apartment living, if Auckland is going to help solve the problem of an undersupply of housing.

I found his comment interesting, as in my experience, it matches Sydney and London's situations, but is probably not what the average Kiwi expects, even in hyper-priced Auckland. So I set off to see what I could find, were I a first-home buyer.

Prime Minister John Key says people should buy apartments. Photo / Mark Mitchell
Prime Minister John Key says people should buy apartments. Photo / Mark Mitchell

Given that a KiwiSaver Home Start Grant is virtually free money to help provide a deposit, I start looking with the $550,000 cap the Government has set to access the grant in Auckland.

This does not prove easy. As a researcher for the TV show, Location Location Location for seven years, I must have visited hundreds of homes and people. Homes ranged from an immaculately done up $200,000 "Tardis" to huge multi-million-dollar pads. Today I confine my search to suburbs that are around 12-16km drive from town, the west and the eastern North Shore.


I am looking near the bottom of the market, in good areas within an hour's drive from downtown in the rush hour.

My search begins on the Shore looking at units and cheaper houses for which there is an established secondary market, and it becomes increasingly apparent that units, or flats, are what many first-home buyers can afford.

Real Estate agent Helene Brownlee has a Ray White agency at Northcote.

"It is impossible to get anything in the $550,000- $600,000 range, unless there is something wrong with it," Brownlee says. That puts the entry point for a three-bedroom house in Birkdale at $700,000, at least.

First-home buyers in Birkdale/Beachhaven are generally professional 30-somethings with joint incomes, she estimates, of more than $200,000. They tend to have some help from parents.

Helene Brownlee says it is hard buy a home in the $550,000-$600,000 range. Photo / Supplied
Helene Brownlee says it is hard buy a home in the $550,000-$600,000 range. Photo / Supplied

"Generally, the kids whose parents have the most money buy the house," she says.

In practice, says Onehunga-based mortgage broker Hamish Patel, those mums and dads are typically stumping up around half the deposit.

I call into one of Brownlee's on-site auctions. The house is small with three bedrooms, pleasantly renovated, with a large deck on a bushy Birkdale section, 15km from the CBD.


Bidding opens around $600,000 and the hammer falls at $750,000. A barometer of a rising market, this house sold for $620,000 about a year ago. I chat to the buyers Mike and Celene (who asked their surname not be used). They have one child, one on the way and have been house-searching for six months. "We must have looked at 80 houses," Celene says.

Mike is surprised by the cost and says they have been looking in areas he had never considered. They are first-time bidders.

"I was going to bid on another, but the bidding just went too high," he says.

Nearby, a split-level town house, listed at $539,000, seems promising. The modest town house seem okay, except there is a damp smell inside, poorly masked by scented candles. A couple of weatherboards near the roof have been removed for inspection. It is a busy open home, with dozens of viewers but the crowd doesn't linger.

The apparent leak looks repairable for a builder or investor who knows the risks. Patel says a bank would be unlikely to lend on such a house to cash-strapped first-home buyers. The likely buyer will have more cash or equity.

Disappointed, I drive back west. I meet John Jacobsen, a salesman in LJ Hookers' Glen Eden branch, to see a variety of flats. The first is a brick-and-tile unit near Henderson township in a cul-de-sac - agent's price guide is $450,000 to $550,000.

The floor is uneven - probably needs re-piling. The seller is getting a builder's report and I suspect it will sell for below $550,000, but you need to factor in the repair costs.

The next unit, nearer New Lynn, has a small garden, a garage underneath and a workshop, but steep stairs. An outdoor area could be converted to a deck.

Mortgage broker Hamish Patel says 80 per cent of the first-home buyers he sees have access to KiwiSaver funds. Photo / Supplied
Mortgage broker Hamish Patel says 80 per cent of the first-home buyers he sees have access to KiwiSaver funds. Photo / Supplied

The unit sells for $560,000 at an auction. First-home buyers would miss out on the Home Start grant, but can still use KiwiSaver savings as part of their deposit.

The final flat we see is opposite the Titirangi Golf Course. It is tidy, has a front lawn and a small lounge. The New Lynn train station is 1.5 km away.

The auction is the next day. I count about 40 cars outside, including a newish Mustang and BMW Z4 coupe - not first-home buyers' transport.

The hammer falls at $531,000. First-home buyers miss out to investors here -- but the house has sold within the Kiwisaver limit of $550,000.

I spot a flat in Green Bay. It is basic but well made, with a lawn and deck. It has two bedrooms, a garage and is listed at more than $600,000. The flat sold after a few weeks on the market. Crunching the numbers on an online mortgage calculator shows it is affordable for a couple earning $120,000. An income of $90,000 (high-income single person) is sufficient for the $560,000 New Lynn property based on a deposit of 20 per cent.

In Te Atatu South, houses have large sections and new flats are going up. Perhaps this will be a future area to gentrify. A 70sq m two-bedroom flat is listed at $549,000 on a "half share" of an 800sq m site.

There is still the odd place nearer town. A small two-bedroom flat in a motel-style unit in New North Rd in Kingsland was listed at $579,000 and auction bidding stopped at $550,000.

Does Key have a point? Is Auckland now where first-timers can afford just an apartment -- or a unit? If you are a couple relying on a Home Start grant, you are almost certainly limited to a unit or apartment. But on your own, unless you earn $80,000-plus, the unit market has probably left you behind.

"It is impossible to get anything in the $550,000- $600,000 range, unless there is something wrong with it,"

A look online shows that for similar money, you can buy a town apartment but apartments have higher costs.

A 75sq m two-bedroom apartment near the waterfront is advertised at $350,000, but body corp and ground rent are $8000 a year, plus rates of $2500. A 90sq m two-bedroom freehold apartment in a block in Symonds St, with a terrace and one car park, priced at $529,000 may be worth a look.

Generally, the units selling for under $550,000 are small, or need expensive repairs. Units costing a tad more are much nicer, but the Kiwisaver Home Start grant is effectively a cap on many buyers' offers.

Perhaps a balance can be found by looking further out of town, for a "do-up". Patel has clients who have bought in Piha and Huntly. If you can't afford Auckland, he suggests Hamilton - the rules allow you to rent out the property six months after you buy it. If using the grant, there is a $450,000 price cap in Hamilton, Tauranga and similar cities.

Still looking

Bob Parkinson has been helping daughter Toni and her partner Aaron Sutherland look for their first home.

"All my other kids have a property. This is the worst situation," he says.

Toni works in the city in IT. The couple have a dog, so need a back yard. They have been looking from Papatoetoe to Orewa, as well as out west. But their family are on the North Shore, as is reasonably priced childcare.

"The further out from town, the longer it takes to get to the creche, so your childcare cost goes up, the bank will lend you less money," Toni says.

KiwiSaver and grant add up

According to Housing New Zealand's website, a single person in KiwiSaver is eligible for up to a $10,000 grant and a couple up to $20,000. This is in addition to withdrawing personal, employer contributions and any returns.

A single person, who has saved 3 per cent of their $70,000 salary over three years should have $6300 in their contributions, plus the employer and government contributions, and returns.

In theory, you can take out everything apart from $1000. (KiwiSaver's advice service advised checking with the provider.) So combining the grant, contributions and returns can amount to a sizeable sum but generally not sufficient for a 20 per cent deposit on an entry-level Auckland property.

Onehunga-based mortgage broker Hamish Patel says 80 per cent of the first-home buyers he sees have access to KiwiSaver funds, but on average have saved less than the above example.

Patel says, depending on the bank's monthly quota, sometimes it's possible to get a loan with less than the 20 per cent deposit - but you may have to pay a higher interest rate for the privilege.