With a record low Official Cash Rate delivering both low mortgage rates and low bank deposits rates, it’s the perfect time for young renters to talk to their parents about buying a property together, says Century 21 New Zealand owner Derryn Mayne
More and more New Zealand families are collaborating to secure a property. While the Government’s housing reset announced last week will help more first-home buyers, many families will still not be eligible for any assistance.
It is pleasing that the deposit requirements have now been lowered for the Government-backed schemes assisting first-home buyers.
However, many Kiwis will still not qualify because of the income requirements, as well as the price caps in place for all singles and couples applying. The price cap in Auckland is $650,000, which is pretty tough.
Another new rule that sees family and friends able to pool their respective $10,000 First Home Grant and KiwiSaver to buy their first home won’t actually enable many parents to trigger greater Government assistance for their kids. That’s largely because eligibility dictates that all applicants can not currently own a property and have to commit to living in the new property for at least six months.
Yes, more first-home buyers will get Government assistance from October, but private family collaboration outside of these public schemes will remain absolutely key to getting a lot of Kiwis into first homes.
Families are starting to realise that no one is winning when the parents are getting nominal returns for their bank savings, while their adult children are paying record-high rents to their landlords.
In many cases now, tenants are paying more in rent than they would be in mortgage repayments. However, with living costs high, many simply struggle to come up with the required deposit. Now’s the time to have a talk to Mum and Dad because there are some serious win-wins to be had in this environment.
She says the parents’ investment will ensure long term capital gain, while their children will be able to get onto the housing ladder at the time when house prices have steadied and interest rates are the lowest in over 50 years.
The parents might stump up the deposit and have their kids paying them back with interest. Alternatively, the parents might own a percentage of the property with their children buying them out when they go to sell their first or second home. Either way residential property in New Zealand has always proven to be a solid medium to long term investment.
In recent weeks Reserve Bank Governor Adrian Orr has also been encouraging the likes of baby boomers to invest their money into assets that will return a good yield or capital gain.
Based on Kiwibank’s 3.55% one-year home loan rate, buying a house at the national median price of $575,000, after paying a 20% deposit, would cost in interest repayments about the same as paying the national median rent of $500 a week. With experts expecting interest rates to fall further, while rents in many areas will continue to increase, buying a house will only become more attractive.
Families should get together with a mortgage broker because many will be pleasantly surprised. Century 21 Home Loans has been getting a lot of calls since the ORC was slashed with multi-generational meetings becoming more of the norm.
Rebecca Fraser, who owns Century 21 Gadsby Realty in Te Awamutu, says her in-laws were key to her securing her first home 18 years ago.
“We got a 10% deposit from my in-laws, which we paid interest only on for two or three years. Then when we sold the property, we paid them back and upgraded without their help. They got their money back plus some interest, so it was a win-win.
“If parents can help in this kind way it makes such a difference. Even in Te Awamutu these days a huge percentage of my rental tenants are paying more a week in rent than people like me pay on our mortgages. With such low interest rates, now is the time to have a talk to family members and see what you can drum up,” says Ms Fraser.
Derryn Mayne
Century 21 New Zealand owner
021 399-431
www.century21.co.nz
