Buying your first home is one of the largest investments you might make. It can feel overwhelming, but you’re not alone. Careful thought and research can help.
Home ownership is something that comes with significant responsibility and shouldn’t be rushed into. But on the flipside, there are some great reasons to keep saving that deposit for a home, writes Bindi Norwell, chief executive at the Real Estate Institute of New Zealand (REINZ).
1. You can get some help from the government
You don’t have to do it all on your own. There are initiatives such as the FirstHome ownership initiative, which helps eligible buyers to buy selected Housing New Zealand properties that are for sale. To help with the deposit, eligible buyers receive a grant of 10 per cent of the purchase price of the property, capped at NZ$20,000.
There is also the Welcome Home Loan, which only requires a 10 per cent deposit (rather than the usual 20 per cent) however there are restrictions around income and the amount you can borrow. More information can be found on the Housing New Zealand website.
2. You can use your KiwiSaver to help with a deposit
If you’ve been contributing to your KiwiSaver scheme for at least three years, you may be able to withdraw all, or part, of your savings to put towards buying your first home. Usually, you can withdraw your KiwiSaver savings (including tax credits) but at least NZ$1,000 needs to remain in your KiwiSaver account.
You must live in the property and it can’t be used for an investment property. This alone is worth contributing your 3 per cent each payday, as your employer also will put in 3 per cent. Your KiwiSaver provider will be able to provide further information.
3. House prices tend to go up in the long term
The price of a home can go up or down, but if you look at the median price of houses in New Zealand, they typically have increased over the long term. For example, the median price for a house in New Zealand in August 2008 was $330,000 compared to $549,000 in August 2018 – a 66.4 per cent increase in 10 years.
In Auckland, the increase was even bigger, because the median house price was $429,000 in August 2008, compared to $852,000 in August 2018 – a 98.6 per cent increase. Therefore, property can be a good long-term investment.
4. Interest rates are low
At the time of writing, the official cash rate was 1.75 per cent and has been at this record low since November 2016. The Reserve Bank governor has talked about holding rate rises until late 2019 or even 2020, much later than expected, which makes it easier to pay off your home loan more quickly. However, it’s important you get the balance right if you’re borrowing when interest rates are low, so you’re not overcommitted if interest rates rise.
5. It forces you to build equity in your investment
Having to pay your mortgage each month means that in most cases a portion of your mortgage payment goes towards paying off the principal of your loan, which helps you to build equity in your home.
This equity will be helpful when you want to upgrade to your next home, or are ready to retire and downsize – particularly if you’ve renovated, which can add extra value to your home.
A home should never be your entire retirement savings plan, but it can certainly contribute towards your retirement, should you be mortgage-free at that point in your life.
6. It’s yours to do what you like with
Assuming you have no covenants or council restrictions placed on your property, if you want to paint your house blue or purple or in your local rugby club colours, you’re within your rights to do this. It might not help you to become best friends with your neighbours, but technically, it’s yours, so you can do as you please with your home.
For most people, this is more about the interior than the exterior, because many landlords have restrictions on hanging pictures, having pets or putting up shelves. When you own the property, you can drill as many holes in the wall as you like to hang pictures.
First published 8 October 2018
Story by Bindi Norwell
Bindi Norwell is Chief Executive of the Real Estate Institute of New Zealand (REINZ).
JUNO does not contain financial advice as defined by the Financial Advisers Act 2008. Consult a suitably qualified financial adviser before making investment decisions. This story reflects the views of the contributor only. Content comes from sources that JUNO considers accurate, but we do not guarantee that the content is accurate.