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During the 2020-2022 period, I helped many first homebuyers achieve their dream of getting on the property ladder. I love my job, and it makes me super happy to see Kiwis get out from under a landlord and into their own home. First home buyers are my favourite – I love to educate them and give them the benefit of my many years lending and property investment experience.
Sadly, however, I had some clients over that period that struggled to make the leap into home ownership. Not because they didn’t have a bank approval – but because they procrastinated……
And the end result was that they went backwards financially.
One such couple who lost focus on their goal, lost 20% buying power over that 2 year period, when they could’ve bought a really nice property, but didn’t. Interest rates went up, their loan affordability went down, and over the 2 years, the property price range they were shopping in reduced dramatically – until finally they needed parental help to get into a property, that they could’ve bought on their own if they’d acted 18 months earlier.
Often first home buyers are nervous. It is a big commitment ! They are worried about something going wrong, and not being able to meet their repayments. And that can happen – none can see the future. But we can protect ourselves as much as possible – your adviser will help you put structures in place to guard against the unexpected. Also, banks rigorously test an application’s debt servicing – the last thing a bank wants, is to see their loan fail, so they build fat into the calculations to minimise the risk.
Sometimes first home buyers are worried about paying too much – maybe if they wait a few months, the price will get lower. The truth ? If you are hopping on the property ladder for life – it doesn’t matter at all, what you pay. In 20 or 50 years – it just won’t matter. Even if you sell that property after 5 years and buy another. Doesn’t matter ! Buying and selling in the same market. The only time it is critical, is if you are speculating – planning to hold it for a short time only, then sell for profit. That’s something to keep away from unless you have a solid financial base, a lot of experience, and a big risk appetite.
Finally, first home buyers can be disappointed at the properties in their price range. They might be comparing with their parent’s home, or they are dreaming of a cottage with an oak tree and a swing……………Reality check – your first home does not have to be your dream home. It will probably not be your forever home. But you can make your mark on it, and it will get you on the ladder, and you can aim for something better down the track.
Just avoid houses that have not been maintained and will need expensive work done – like a re-roof – unless you have the savings put aside. Also steer clear of non-complying works – plenty of that in Northland.
If you are reading the commentary coming from various economists right now, indications are that we have probably hit the bottom of the property cycle, which means prices may start to rise from late this year. Don’t get caught napping like others did in the last cycle.
The best thing you can do at the start of your home ownership journey, is get a good adviser working with you. Someone to answer your questions, and keep you motivated and on track.
