Up until about a year ago we were fixated as a nation on finding ways to get first home buyers into the housing market.
First National, and then Labour, grappled with the issue, variously identifying rapid house price inflation, competition from investors and foreigners, and the Reserve Bank requirement for a 20 per cent deposit as obstacles preventing young people from buying their first home.
Then, in May 2018, property data company Valocity released a report which exploded as a myth the idea that first home buyers were closed out of the market.
The report showed that first home buyers everywhere except Auckland had dominated the number of new mortgages uplifted in each of the 5 years between 2013 and 2018.
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In fact, it's arguably easier for first home buyers now because we're in the flat part of the property cycle in Auckland and moving into it in other parts of the country. So if you're a first home buyer there's less price competition and less pressure to buy.
So what are your options if you're trying to buy your first home? Here are some ideas:
1. Negotiate on price. One of the advantages of a flat market is that price negotiations are on a more equal footing and any saving you make on the price also mean a saving on the deposit.
2. Use Kiwisaver. If you've been a Kiwisaver member for more than three years you may be able to withdraw some of your KiwiSaver savings (provided you leave a minimum balance of $1000 in your account) to put towards your first home.
3. Apply for a Kiwisaver Homestart Grant. In addition to putting your Kiwisaver savings toward a deposit, you may qualify for a Homestart Grant. If you're purchasing an existing home the grant is $1000 for each year you've been a member of Kiwisaver for up to five years ($5000). If you're building or purchasing a new home, or the land on which to build a new home, the grant is doubled – up to $2000 for each year you've been a member of Kiwisaver, for up to 5 years ($10,000).
4. Apply for the Welcome Home programme. If you're buying your first home and your household income has been $85,000 or less for the past 12 months (if you're single) or $130,000 (if you're a couple) you may qualify for this scheme, which allows you to buy with just a 10 per cent deposit, regardless of whether the home is new or existing. There are a range of other criteria — and not all banks are partners in the programme — but it's definitely worth checking out.
5. Buy new. If you're buying a new dwelling you only need a 10 per cent deposit. This this doesn't just apply to first home buyers — anyone is eligible, even investors! This is probably one of the least understood aspects of the current Reserve Bank rules.
6. Access the Bank of Mum and Dad. Under certain circumstances your bank may allow you to utilise support from Mum and Dad to help you into your first home. This could take the form of them providing your deposit — or it could mean using equity in your parents' own home as security for your loan, effectively enabling you to borrow up to 100 per cent of the purchase price. As with most things there are conditions governing how and when this can be done.
- Ashley Church is the former CEO of PINZ