SO, YOU WANT TO BUY A HOUSE

Since this is a article about buying your first home, you might expect that I start with a line about how New Zealanders have a “love affair” with property.
Or how a quarter-acre section is part of the “national psyche”.
Or maybe how every young person dreams of buying a house.
I mean, we hear it so often that it must be true, right?
But this is not most articles. And, given that you are navigating the New Zealand real estate market during the third decade of the twenty-first century, after a the pandemic has pushed up prices by almost 40% in just one year (although followed by a slightly softer drop), you are not typical of “most” houses- buyers.
The truth is that house prices have risen so much in the last decade, even taking into account a few periods of weakness, things are a little different now.
Yes, it is true that interest rates are generally lower than they were when some of our parents bought houses (many borrowers today would pass out on the spot if they saw a 20% interest rate from the bank, and even more would end up defaulting on their mortgages).
But on a price/income basis — this is the number of years of median income it would take to buy a house at the median price — things are considerably more difficult now for modern buyers than they were for previous generations. You can you quote me on that the next time an older member of your family tries to say you otherwise.
In June 2022, the median income of employed people was $1189 a week, or $61,828 a year. The median house price in the New The average was $850,000 — about 14 times that single median income.
When I started thinking about buying a house, someone gave me a article that promised to tell me how to pay off my mortgage in less than five years. It included tips like researching the price the seller had paid the house and offering a little more to cover their selling costs.
Even then — which feels like a million years ago, but feels more like 10 it seemed unlikely to be a successful strategy.

And the idea of repaying a home loan within five years? It could be possible if you borrowed $100,000 and you were a couple each earning a good salary. But when you borrow a million dollars to get in the door of a lot of Auckland houses, it’s pretty far-fetched to expect a loan not to stick for decades, unless you have a few extremely lucky Lotto tickets in your back pocket.
So, this is all a bit depressing. But that means it’s time for a new article and a new approach to buying a house. All clichés aside, buying a house is always a great goal for many people and it is still possible, although it is not always the case feel like it.
Statistics show that first-time home buyers are incredibly resilient, all things considered. No matter what the market throws at them, and as unlikely as the asking prices seem to be, first-time home buyers are sticking to it. They reliably make up at least a fifth of all buyers, and sometimes a quarter, according to real estate analysis firm CoreLogic. This held even during the period when New lending rules of the CCCfA (Law on Credit Contracts and Consumer Credit) happened in December 2021 and people had to start counting the food they were buying for their dogs.
We seem to be just as ready to take out a $700,000 plus loan with a financial instrument that is literally called a “death pledge” as we were when it took more than $250,000 to get in the door.
But homeownership is not for everyone, and not at all stages of life. You we might have said “the best time to buy was yesterday”, but that’s only true if it really suits your situation. (This could also be true if the market is crazy and on your side, but this is extremely difficult to predict.)
Here are some things to consider when determining whether homeownership is right for you, and if it is, when it might be. No crystal balls are needed, but it’s good to be as honest with yourself as possible.
Do you worry about having a safe place to live?
Except in relatively rare and fortunate circumstances, most adults have to pay for a place to live. If you rent, the money you pay actually pays off on someone else’s home loan, rather than on yours.
When you move, you don’t have to show anything for the years of payments you made it. You will get your deposit back if your final inspection takes place smoothly, and maybe a reference for your cat if you managed to get a owner to accept a pet, but that’s it.
But when you own a house, even if the prices don’t go up for a while, you are always pay off your loan and generally build equity over the years. You could see this as some kind of forced savings that should give you some nest egg at the end of it, in the form of a freehold house.
When you own your house, you won’t have a landlord who will tell you that you have to move because they want to go back, or they put the house on the market. This extra sense of security is a big problem for many people, especially families with children. Moving regularly becomes pretty tiring when it means taking your children out of a familiar environment and settling in a new place.
And most of the time, in most parts of the country, it’s not that hard to sell your home if you find that you need to move or that the security that we just talked about about is not really a good thing for you.
Usually you can put your house on the market and, provided that the price is that’s right and there are no major problems with the property, you can find a buyer.

You won’t always make a lot of money, but you should be able to move on. In in this way, homeownership can be quite flexible and not the permanent bond that you I might have thought it was.
You can also rent out your property if you buy it and then find that you have to move somewhere else for a while, which gives you an investment and a way return to the area if you come back.
Do you want to limit the amount you pay for your at home in the future?
Rents tend to increase from year to year, so the amount you have to pay for your the house will rise.
It’s not always a big problem if you win and if you get solid salary increases as you progress in your career, but this can be a major factor problem when you retire and have a more fixed budget. If you pay your house by the time you retire, it puts you in a much better position for a comfortable and less stressful retirement.
Although the rent may continue to increase, the amount you owe on your house will not increase unless you borrow more. Certainly, interest rates are moving a lot but, as we have seen in recent years, they go down as well as they go up, so you will get a reprieve from time to time.
Over time, inflation makes the amount you paid for your house, and everything the remaining mortgage on her, seems small.
Just look at the listings of old houses from the 1970s or 1980s to see how many prices change (and you’re probably cursing that you’re not alive or not earning enough pocket money at the time to buy a house in one of the leafy suburbs).
In the 1970s, about $20,000 was a fairly typical house price. A new article on Stuff in 2021 followed a house that in 1975 was for sale for offers more than $36,000. It resold for $1.1 million in July 2019.