The term ‘living within your means’ has never appealed more when trying to buy a house in today’s market.
A new build can still be within your reach financially, but it will be on a smaller scale. New two-bedroom houses on the outer suburbs of Auckland, in Pukekohe for example, are available at $600,000 or you can purchase an older three-bedroom home in Gisborne varying from $300,000 to $495,000. You may not be located quite in your dream location yet, but it all comes down to understanding what you can actually afford. Look at starting the journey to your dream property on what is financially achievable.
The temptation of interest rate cuts
It’s easy for the green-eyed monster to surface when interest rates are low — actually at an historic low — and more money is accessible. Avoid temptation to take out a loan that is more than you can afford. The key is to keep your debt reasonable and repayable.
With the official cash rate expected to dip near zero towards the end of 2020 — which would normally see people purchasing more grandiose homes — I’m starting to see buyers become more cautious by thinking about overall affordability.
Let’s put this into perspective. The average Kiwi moves homes every seven years, which can be due to a variety of reasons, from a job offer to family issues. Mortgages, normally over a 25-30 year period, are structured so you are paying a majority of interest early on, but the longer you hold onto your property, the better positioned you may be to financially attack the principal on your loan.
If you were to sell and buy new every few years and upgrade your house while keeping the same level of debt then you will continue to pay high levels of interest and your ‘quarter acre dream’ will continue to be out of reach.
Persistence pays off. Hold onto your property, move to the same type of home with lower debt and more equity or even accumulate more of them, but avoid the trap of constantly buying and selling with increasing debt thinking you’ll always get more than what you paid for your home initially . . . it doesn’t always work out that way.
Times are changing
Multi-generational homes are in demand — whether it’s a granny flat out the back or a downstairs living area. As appealing as it is to move back in with your parents, or have them under your roof to contribute to the costs of your new home, it might be worth it in the long-run.
New Zealand census data shows that between 1996 and 2013 there was an increase in extended family households from more than 333,000 people to around 496,000.
While this isn’t an option for everyone, it’s an option that could save you money and help with the first step.
Be patient and have a vision (no matter how big or small)
I came across an interesting quote in the NZ Property Survey Report 2015 from a member of the public who explained that, “while Central Auckland is expensive, it is time to look elsewhere. Hard work and saving can mean you can still afford to buy, it just may not be the quarter acre dream anymore.”
I mostly agree with the quote . . . except that I believe your ‘quarter acre dream’ is attainable — you just need to work towards it, be patient financially, and understand that it may take longer than you anticipated.
Slow and steady always wins the race.
• Kevin Atkinson, residential group builder expert from top 10 national group building company Generation Homes.
