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Website story by Stephanie Munro
For most young New Zealanders, the idea of buying their first home in the current property market remains an unattainable dream. Last year, housing prices in New Zealand reached their absolute limit of affordability, solidifying the ongoing downward trend of first-home buyers across the country.
The reason for the drop in younger buyers is clear: cost. According to the latest figures from Flitch Ratings, when linked to income, New Zealand houses came out as the least affordable of the 22 countries analysed in the report.
Statistics from the Property Institute of New Zealand show that home ownership in the 30–39 year age bracket has dropped 13.6 per cent in just over a decade, and the trend is steadily growing.
What is the average price Kiwis are paying for their first home in 2017?
Nationwide, the average price first-home buyers are paying in 2017 is $461,000. This average has increased by 2.4 per cent from 2016, and 15.25 per cent from 2014.
What is the impact of this on New Zealand as a society?
Ashley Church from the Property Institute of New Zealand has some insight:
“New Zealand has traditionally been a property-owning democracy, so the drop-off in home ownership rates over the past couple of decades is likely to have a dramatic impact on the social fabric of a society going forward. It will increasingly affect the ability of Kiwis to travel, purchase big-ticket consumer items and buy businesses.”
What can young Kiwis do to improve their chances of buying homes?
Mortgage broker Campbell Hastie from Go2Guys says first-home buyers are strongly advised to buy with a partner or friend, because even a single person with a steady income of $85,000 would still struggle to be approved for a loan to buy a $650,000 house in the current market – even if they had a $65,000 deposit.
“People need to buddy up and buy with a mate or a partner – one income might not cut it, but two incomes probably will. There will probably be more deposit to throw in too, which is always helpful, even if the loan-to-value ratio doesn’t drop to 80 per cent,” he told Stuff.co.nz.
Should we still be buying in the current market?
According to Church, it’s a confident yes.
“While the features of each property boom differ, the broad trend over a 30- to 40-year period has been for prices to increase, with each boom being followed by a plateau of prices for three to five years, before taking off again when the next boom comes along.”
For this reason, Church says, major corrections in the market or a crash in property prices are highly unlikely, based on the history of the New Zealand property market.
“The best time to buy is always now. House prices generally double in many parts of the country over a 10- to 12-year period regardless of what stage of the cycle you’re buying – and trying to second-guess the market by waiting till ‘the right time’ puts you at risk of paying more if you’re caught off-guard by a sudden surge in the market. Buy now.”