There has been a lot of media attention recently about how difficult it is to buy your first home in Auckland. This is of course absolutely correct. The biggest barrier to a lot of people is the deposit.
Banks have restrictions on how many people they can lend to with less than 20% deposit. This means that the people they do lend to in this category pay a premium to borrow funds. This is further complicated by the fact that the banks’s appetite for lending will move from week to week, depending on how much lending they currently have with less than 20% deposit.
This change in appetite is because the banks are limited to doing 10% of their lending to those with less than 20% deposit. The number of drawdowns a bank is completing will determine how much they can lend to those with less than 20% deposit. The banks criteria are based on serviceability, deposit amount, bank history and other factors. The importance of each criterion can move constantly to make sure they are lending to the highest quality applicants possible in this space.
Eightfold advisers can help in several ways. We can give you an honest assessment of where you are at and not only advise if your bank will help but if any other banks are currently lending in this area. We can also walk you through how family assistance can be used through gifting or provision of equity.
There are also exclusions to the 20% deposit rule which can mean it will be easier for you to obtain finance for certain types of property. For example, as long as you are buying direct from the developer, new builds are generally exempt from the 10% threshold for bank lending for those with less than 20% deposit.
If you are a member of Kiwisaver there are also some key features that may help you into your first home. Kiwisaver offers both
- The Kiwisaver first home withdrawal
- The Kiwisaver Homestart grant
The Kiwisaver firsthome withdrawal allows those who have been a member of Kiwisaver for at least three years the option to withdrawal all or part of their saving to put towards buying their first home.
The Kiwisaver Homestart grant provides eligible first home buyers with a grant of up to $5,000 for individuals and up to $10,000 where there are two or more eligible buyers to put towards the purchase of an existing home. If you are purchasing a brand new home these numbers are doubled to $10,000 for individuals and $20,000 when there are two or more buyers. Your Eightfold advisor can work with you to advise if you may be eligible to take advantage of these opportunities
So is now a good time to buy? Getting on the housing ladder is the hard part, so really as soon as you are ready is the best time to talk to an Eightfold advisor about getting into your first home. While the market may slow in the short term due to impending elections, tightening credit controls or other factors; over the long term the property market in Auckland has doubled in value every approximately every 12 years. So even if prices were to drop slightly in the short term, over the medium to long term the value of your new home is more likely to rise.
I encourage you to call one of the Eightfold team on 0800 881 886 to discuss your circumstances and how we can help you get into your first home today.