The apparent impossibility of buying a first home has many young people questioning whether owning a property should still be part of long term financial plan. Does it really make sense to put aside other things in life such as travel, having children, paying off student loans or simply having fun, just to save a deposit and pay off a mortgage? The answer is yes.
Taking a very long term view, there is no doubt that to own a mortgage free home in retirement makes a massive difference to the quality of life. NZ Superannuation payments are not enough to cover rent or mortgage payments. Renting comes with the risk of increasing rent payments and the risk of having your home sold from underneath you. Home ownership makes sense – it’s just a question of when and how to buy. Here are some tips:
- Property values fluctuate. The best time to buy is at the bottom of a cycle, although the longer you own a property, the less important the purchase price becomes. Be patient and avoid getting sucked into the fear of missing out.
- Be prepared to make compromises and sacrifices. Your first home doesn’t need to be your dream home. Buy a house you can add value to with redecorating and minor structural changes. Live somewhere cheap while you save for a deposit – with parents or other flatmates.
- Avoid taking on other debt while you are saving. Borrowing to buy a car will make it harder to buy your first home.
- Your first property doesn’t have to be your own home. Become a landlord. If you are using KiwiSaver funds you must live in a house for at least six months. Currently you need a 40% deposit for an investment property but this a temporary restriction which will change.