As prices in Auckland continue to soar, we often encounter people, typically younger Kiwis, who are having some trouble getting onto the property market. They know how effective building wealth in this environment has become in recent years, but what would be their benefit is also their bane: higher house prices mean higher rents and a higher deposit. Sometimes, it can seem like first home buyers just can't win in the current property investment environment.
However, the fact is that it is perfectly possible to start your journey down the property investment path – as long as you have the right advice and are able to think outside the box. It's time to forget the traditional way of making money through property: let's get creative.
Build your way up
The earlier you start with this kind of venture, the better.
One of the main issues that a first home buyer in Auckland will encounter is the fact that the large deposit they have to put down. After macro-prudential loan-to-value ratio restrictions were implemented in 2013 by the Reserve Bank, young Kiwis have had to pony up at least 20 per cent of the value of the home in order to secure a loan.
So let's say you wanted to buy a home in the up-and-coming Hamilton: the median value here is $480,000 according to QV: cheap as chips compared to Auckland, though with 26.2 per cent value gains over the last year, it may not stay that way! That translates to a pretty hefty 20 per cent deposit – but that rule only applies to existing property. If you can afford to wait a little while (and if you can't, then property likely isn't for you!), building a home only requires a 10 per cent deposit.
A pretty significant difference for someone with a little less capital than the average home-owner.
A team effort
However, you may find that even this $48,000 deposit would be too much. Traditionally, couples would put their capital together to afford this, but even that sometimes isn't enough. What this does is force you to start considering alternative options: like buying with friends.
Many young Kiwis are choosing to do just that – whether it's an investment property or a first home, getting yourself onto the ladder and taking advantage of the rocket-powered growth we've seen throughout the country lately is integral to securing your retirement in the future.
The earlier you start with this kind of venture, the better. Don't just let your cash sit in your KiwiSaver – get investing, and start accruing capital. There are plenty of ways to do it, as long as you have the right advice and the right attitude!
Here's to your financial independence!
Authorised Financial Adviser / Investment Property Expert
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