How to Afford a House in NZ Without Millions in the Bank

Affording a house in NZ might seem out of reach but CANSTAR is here to help your search for affordable home

Over the last year or so, it’s hard to turn on the TV, read a newspaper or chat at the water cooler without the topic of New Zealand’s house prices coming up. Those in their 20s looking to buy their first home – myself included – can end up feeling pretty deflated by the whole process. In fact, the term “affordable homes” starts to feel a bit like the start to a “back in my day” narrative from older relatives.

The harsh reality of housing affordability is that if homes go up in price and/or mortgage rates increase, but wages and salaries don’t, then homes become less affordable. Conversely, if a combination of the first two drivers drop and income stays static or goes up, then homes become more affordable.

So how do you keep your spirits up in this challenging New Zealand property market? Well, there’s a light at the end of the tunnel. There are in fact some options available to First Home Buyers in their quest for housing affordability. And it doesn’t require you to become a millionaire to get there.

CANSTAR's Guides for First Home Buyers

What are home affordability indexes?

Home affordability indexes look at median house prices to see whether someone could afford to pay their home off on their salary. But just because you can’t afford the average house price, it doesn’t mean an apartment or a unit, for example, are beyond your reach.

According to the March 2016 Massey University’s March Home Affordability report, the outlook is actually improving across the country.

Massey University reports a 9.2% annual improvement in affordability across the country. All regions, with the exception of Central Otago Lakes show an improvement in the national affordability index compared with the same period in 2015.

However, affordability in houses in the Hawke’s Bay region have dropped by 6.7%. over the past two quarters. Central Otago Lakes; Taranaki; Manawatu/Whanganui, and Southland also report deterioration in affordability for the first quarter of 2016

On the bright side for Aucklanders, the city of sails has sustained its improvements in affordability for the third consecutive quarter, with a modest annual improvement of 3.1%.

In addition, the national median house price has decreased by $9500 (2.1%) from the last quarter. However, overall, prices have still risen by $20,000 (4.65%) over the last year

So how can I afford a house given these statistics?

The power of positive thinking with affordable homes

OK, so we’re not about to tell you putting the words “affordable houses” on your dream board will suddenly put the mansion in your neighbourhood within your budget. But a little bit of positive thinking – and a lot of homework – could make becoming a First Home Buyer a reality.

Those that look for ways to succeed are more likely to become home owners than those who don’t.

Too many people think: “I can’t do it” or “I could never buy a house”. Yet thousands of Kiwis buy their first home every year. Not all will be earning astronomical salaries.

Many of those that succeed have saved hard and taken a can-do attitude to home ownership. They don’t get stuck on the negatives of:

  • “No-one can afford to buy in this market.”
  • “I don’t earn enough.”
  • “Prices are astronomical.”
  • “The average home is unaffordable on the average wage.”

 

Ways to Afford Your First Home
Look outside the city Tauranga from Mount Maunganui Consider looking outside the big cities like Auckland.
Savings grants A helping hand from a First Home Grant might get you into the property market.
Units Apartments in the City Another affordable housing option worth considering is buying a unit.
Apartments Don’t rule out other housing options, try some sky-high thinking and consider an apartment.

What other assistance is available to First Home Buyers?

Other assistance available to First Home Buyers includes schemes such as the Welcome Home Loan, or KiwiSaver which can give a leg up into home ownership. Or they club together with friends or family to buy their first home.

Or, first time buyers sometimes enter “shared ownership” deals housing trusts such as the New Zealand Housing Foundation or Queenstown Lakes Community Housing Trust. The homeowner buys a portion of the house such as 60% or 80% with the housing trust owning the other portion. Over time the homeowner buys up more of the property until they own it outright.

Other out of the box thinking can include Housing New Zealand tenants buying their homes from the government, Māoris applying for assistance from their Iwi or qualifying for Kāinga Whenua loans on Māori land.

Don’t forget, knowledge is power when it comes to making a massive financial commitment such as entering a home loan agreement. Shop around, compare home loan interest rates for First Home Buyers, and make sure you get the best fit for you.

Compare First Home Buyer Loans with CANSTAR

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