First home out of reach? Co-buy it

Theo Michaels

First-home buyers with little hope of getting on the property ladder are being encouraged to team up with others to buy a house.

British company Co-Buy With Me is launching a website in New Zealand which acts in the same way as a dating site - but for house buyers rather than would-be couples.

With the average house price now about six times the average annual income, Theo Michaels, of Co-Buy in London, said more New Zealanders were keen to share ownership. Aucklanders would be particularly interested, he said.

Mr Michaels said co-buying could help more New Zealanders into a house. Co-buying is when two or more people legally group together to buy a property. They share the cost of the initial deposit, mortgage repayments, expenses - and eventually in the capital gain if the property becomes more valuable.

Mr Michaels said many people already rented with others who were initially strangers, so buying a house with people who were not family or friends was the next logical step.

But he advises people to be cautious to begin with, until they can be sure the other party is genuinely interested. Only correspond by email, then meet in a public place, he says. Do not meet alone at the start, take a friend and a fully-charged mobile phone in case things go wrong.

"It can take time to get to know someone properly and if they are genuinely interested in co-buying they won't mind you being cautious," he said. "Always use your common sense, keep in control and don't be forced into doing something you wouldn't normally do."

People should be polite on the email initially and not lie about their details. Once they are sure they want to buy jointly, Mr Michaels advises they sign a declaration of trust which is a legally binding agreement to clarify the relationship, stipulating that decision-making is equal, all costs and profits are split equally and the buyers agree to live in the property for a minimum of two years.

Alister Helm, chief executive of realestate.co.nz - a property website owned by the Real Estate Institute and a group of real estate agencies - said the co-buying concept was great and would help solve the affordability crisis.

"It's a classic example of how the internet can be used for like-minded people to link up. But nobody is going to sign up and buy a house without checking out all the details, so it's a bit like finding a flatmate," Mr Helm said.

The Consumers' Institute's David Russell said he had bought a house with others in the 1960s. But people needed to be mighty sure they got on with the other parties.

"The legalities of ownership need to be nailed down very firmly: Is it going to be a company, partnership, tenants in common or whatever? A related issue is maintenance and common outgoings. Shared ownership is much more complicated than sharing an apartment.

"And then there is the value of the property and who gets what when one party decides to move on. You might find it very difficult to sell your half share and if you do, it is likely to be at a discounted price compared with the price you would get if you sold the house as a single unit," he said.