Advice for new property buyers
Whether you're looking to purchase your first home or your first investment property, if you're a new property buyer, it can be daunting to navigate today's market. Barfoot & Thompson Director Kiri Barfoot shares some tips.
Save, save, and save some more
There’s no getting around the fact that, in order to purchase your first property, you'll need money in the bank.
Saving up a home deposit can be the biggest obstacle for first property buyers. Studies, travel, and money spent on an active social life are obvious roadblocks to saving, but with rising house prices not corresponding to wage increases, what’s a young person to do?
“It’s important to remember that it has always been difficult to get your foot on the property ladder,” says Kiri Barfoot. “Instead of giving up, keep focused on your goals and consider your options.”
Some ideas to help you save faster
- Those who are fortunate to have the option of living with family while saving for a deposit could make the most of it. "It's also becoming more common for parents to leverage the equity in their own homes to help their kids get on the ladder."
- Maximising your KiwiSaver contributions with a view to withdraw funds for your first home can be another way to build up savings more quickly and automatically.
- You may be eligible for the Welcome Home Loan, which means you'll only need a 10% deposit. Check their website for more details and eligibility criteria.
- It may seem obvious, but cutting back on non-essential spending is necessary to reach your goals faster. Saving even small amounts can add up over time, and most importantly, will help build the savings habit and mindset.
"Property investment is an expensive pursuit and some sacrifices will need to be made. This doesn't have to mean no more fun, but you'll have to consider your priorities and savings goals before purchasing something non-essential - only you can decide whether something is worth it to you."
Think outside the box
If you've managed to save a deposit, the next step is to find a property you can afford.
As a young property buyer, it helps to look beyond the ‘traditional’ standalone house on a quarter-acre and expand your search to include apartments, units, terraced houses, multi-family properties and new builds.
“Remember that your first property isn’t necessarily your forever home, but a good way to build equity that you can use for your next property,” says Kiri.
You could also consider getting a flatmate or two, or look into temporary options such as Airbnb or boarding overseas students. While it can be a sacrifice to give up some privacy, the rental income can go towards covering costs such as the mortgage, utilities bills, or property maintenance.
Look for opportunities
Keep an open mind and be prepared to look at neighbourhoods that aren’t so trendy, or properties that are rough around the edges. “If you look around, there are still opportunities to be had for entry-level properties,” says Kiri. Areas that are close to public transport hubs or new motorways (both new and proposed) are great places to look.
“It pays to not be a snob. In the 1960s, people turned down Herne Bay properties as they had to drive through Ponsonby to get there. Now, look at both suburbs! You never know which suburb will be the next up-and-comer.”
While you may not be able to afford to buy in the neighbourhood you want to live in, it’s likely that you’ll be able to afford to rent there, and perhaps purchase a property in a more affordable area to rent out.
While there are trade offs - e.g. you will still be living in a rented property and not one that you own, plus learn to become a landlord or engage the services of a professional property manager - this could be a way to continue to live the lifestyle that you want and build equity, which could then be used to get you into your forever home in several years’ time.
It’s important to note that as an investor, you will not be eligible to withdraw funds from KiwiSaver or be eligible for the HomeStart Grant. Doing your due diligence and weighing up the pros and cons is essential if you choose to go this route.
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Keep your finger on the pulse and your eyes on the prize
Read our market updates to keep your finger on exactly what is happening in the market, and work with a salesperson who knows your area well, who'll be able to inform you of any properties coming into the market that meet your criteria, as well as offer support and professional advice.
"Property is a long game. Don't get swayed by the daily headlines and think long-term," says Kiri.
Last but not least, stay positive! "Don't give up, you'll get there eventually," says Kiri. "You can have it all - you just can't have it all at once." The financial stability and freedom you create for yourself will far outweigh any sacrifices you make now.
Ready to get started?
Search for your first (or next!) property now.