First-home buyer? Looking for creative paths to home-ownership?

The Kiwi dream of owning a house is not over – it’s simply taking a new direction.

According to BNZ Financial Futures Research, a growing number of first-home buyers are thinking laterally, and are planning to enter the housing market through property investment.

BNZ asked aspirational first-home buyers what they were prepared to do to get on the property ladder. Notably, 44 percent said they would buy a rental in a more affordable neighbourhood, town or region, and become a ‘renter-landlord’. Other respondents said they would consider shared ownership and join forces with friends (14%) or family (30%). Also interestingly, 19 percent said they would buy land outside of the city they lived in and build from scratch.

A response to rising prices

BNZ’s findings paint an interesting picture of the current housing market: property investment is no longer viewed as an ‘exclusive club’ but rather a creative, non-traditional route into homeownership. Some would say that ‘necessity is the mother of invention’.

“We all know that New Zealanders have a reputation for their ingenuity and they’re showing it again when it comes to looking at all kinds of creative alternatives to buy their first property,” said Paul Carter, BNZ’s director of retail and marketing, adding that rising house prices are ‘part of the context’.

$1 trillion market

Recent data from the Property Institute revealed that New Zealand’s combined stock of residential housing is now worth nearly $1 trillion, having jumped from $660 billion to $940 billion over the last three years. All in all, New Zealanders currently have $242 billion in mortgages.

Obviously, not all areas have been growing at the same pace, and that’s where first-home buyers are looking at investing. But if you’re considering this option, bear in mind that there are important things to consider.

Is property investment the right choice for you?

Non-traditional paths to homeownership involve a fair share of research and planning. The first thing to understand is how much it would cost you.

Unlike owner-occupied properties, which require a 20 percent deposit, investment property buyers need a deposit of 35 percent. Cashflow and return on investment after expenses are also key factors to take into account, including the cost of rates, repairs and maintenance.
Does the rental income exceed these costs?

As a starting point, you can try one of the many tools available online, like Westpac’s and ASB’s online calculators.

Then, try to focus on the ‘what ifs’. What would happen if the property wasn’t tenanted for a certain period of time, or the tenants didn’t pay rent? Would you be able to keep up with your mortgage payments and your own rent at the same time?

Purchasing a rental can offer you a shortcut to homeownership, but it’s also a long-term commitment. In short, the decision boils down to your needs and goals, and we can help you explore this from the many different angles.

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