A month into the new banking era of mortgage lending caps, I am already hearing anecdotal tales of quieter open homes, vacated auction rooms, and buyer frustrations. Whereas previously the housing market rivalled that of supermarket frenzies witnessed every 24th of December, now there is an eerily silent scene awaiting vendors and agents. I am confident that in the coming weeks there will be surveys, studies, analysis by industry players detailing the marginalisation of certain class(es) of people shut out of the market by the Reserve Bank. The likely victim? First-home buyers.
With house prices as they are, supplies still in shortage, and now financing becomes just a bit harder, it looks like all odds are stacked against first-home buyers. Though I continue to maintain that it is not the Reserve Bank’s role to dispense social justice by way of enabling first-home ownership (even to the detriment of the financial stability of the country), it is hard not to feel sympathetic. Homeownership has such an universality, especially in a settlement society, that we cannot help but be emotionally invested in its outcome. I find myself rooting for first-home buyers with a very similar display of earnest fervour I usually reserve for Dickensen victims. I want to see first-home buyers getting an equitable deal for their first property just like I wanted desperately for Pip to overcome his childhood surroundings and adult hubris. But the funny thing about social justice is that we are so often guided, and blinded, by emotion that we lose sight of the broader issue. The people who are shut out of the market are not just first-home buyers, they are low-deposit (first-home) buyers. This is the class of people who pose the greatest risk in an economy that is increasingly fuelled by debt. The Reserve Bank is quite justified in this market to introduce an element prudence to slow borrowing down. I would go as far as saying that there is probably no other body of economic policy makers more qualified to do so.
So, is Auckland homeownership the impossible dream? I believe not. Where there is a will, there is always a way. And I believe the Kiwi love-affair with properties is not about to end anytime soon. Here are some suggestions for first-home buyers to level the playing field:
- The Welcome Home Loan scheme has been designed specifically with low-deposit first-home buyers in mind. Bypassing the LVR Restrictions, low-deposit borrowers who earn under the threshold amount can procure a loan with only 10% deposit. If you are still finding the market tough, now is the time to tap into Kiwisaver’s First Home Deposit Subsidy.
- Though the market will not come to a grinding halt in the next couple of months, it will slow down during the holiday season as it always does. Motivate first-home buyers should dust off the Christmas mince pie crumbs and get to the open homes.
- Fresh from his triumph as the first ever Property Idol as voted by the Auckland Property Investors’ Association, Kyron Gosse gives some sage advice for first-home buyers, “Home ownership is still possible, you might need to re-adjust your expectations. Rather than buying a house, consider buying a unit. Look at more affordable suburbs as your entry into the market. Personally, I think the best idea is to start with an investment property. Let that grow for you while someone else pays it off. You can pay down the mortgage to increase your equity faster, and then use that property to get yourself into your own home.”
- Rather than moving into a flat with friends, why not pool your respective deposits together and buy a property jointly? You can own your own home and still live with your mates. A friend of mine did exactly this a few years ago with three friends. She then tapped into her family’s resources and building expertise to subdivide the plot to build a second property that was later sold. All four of them had done very well out of it.
- Some first-home buyers are electing to retreat from the market temporarily by terminating their rental leases and moving home to live with their parents. This can cut down on outgoings as well as providing parents (especially those that are retired) with an alternative income stream. Come the time for these buyers to re-enter the market, the parents are also more likely to be in a position to help out financially.
- Others are suggesting first-home buyers to hold tight and give it some time for the second-tier financiers to reemerge in the market. Although this is likely to result in riskier loan terms for a group of people who are already disadvantaged by the mainstream system.
What are some of your suggestions for first-home buyers in this competitive market? Share your thoughts below.