Feb 28, 2017 7:26:27 AM

Housing investment options for first home buyers

Topics: Investment Property, First Home, LVR, Home Buyers 0


Across the country, house prices dipped in December 2016, while in Auckland prices remain “seriously unaffordable”. It’s not surprising then, that more and more buyers are considering their options for housing investments to gain a foothold on the property ladder. We ask the question, are there any options left for first home buyers?

Buying an investment property in the regions

While career and family commitments have you locked into living in Auckland, Wellington or Queenstown, that doesn’t mean you need to shelve your home ownership dreams. Rather than waiting until you’ve saved enough deposit to buy a property in an area you simply can’t afford to buy into, consider buying an investment property in one of the outlying regions where property is considerably more affordable.

Across the country, house prices have dipped since December, with the country’s most affordable regions now made up of Invercargill, Gisborne, Rotorua, Hastings, Palmerston North, Timaru and Dunedin. The least affordable were North Shore, Manukau, Rodney, Central Auckland, Waitakere, and Papakura/Pukekohe.

Real Estate Institute of New Zealand (REINZ) reports that some of the regions, even those close to Auckland, now show median house prices of less than half of those in the city itself.


Moving out to the regions

If you’re not tied into working in one of the major cities, moving out to the regions could save you a considerable amount of money. Aside from the obvious lifestyle advantages, a lower cost of living and the opportunity to own your own home are major drawcards.

What’s more, you may not even have to go that far out to enjoy the benefits. In Northland, for example, the median house price is currently $410,000, less than half the average in Auckland, while still being close enough to commute. And with new technology bringing businesses and the world closer together, regions even further afield may be suitable options for the modern worker.


Changes to LVR could benefit first home buyers

Property Institute of New Zealand Chief Executive, Ashley Church, has called for the Government to review its existing Reserve Bank policy, in particular the LVR restrictions on first home buyers. This comes in the wake of Reserve Bank governor Graeme Wheeler’s announcement that he will be stepping down at the end of September.

"The decision to put LVR restrictions on first home buyers has been directly responsible for stopping thousands of kiwis from buying a first home - and the longer they stay in place the worse the situation gets,” said Church.

Church added that he would also like to see the Government adding a 'Housing Market Supply' clause to its contract with the Reserve Bank, which would require the Reserve Bank to consider the effect its policies have on overall supply, saying:

"If such a policy had been in place two years ago the disastrous LVR restrictions would have been much more carefully considered - and there would be no talk of debt-to-income limits on lending".


Do your homework

It’s vital you do your homework before making any decisions, as the risks involved in buying an investment property in the regions are no different to those when buying in Auckland. And with house prices stabilising, it may make more sense to simply work on a saving strategy that will allow you to buy property in the area you work in, in a year or two. If you’d like advice on your options for taking that first step towards owning your own home, get in touch with a Mortgage Express adviser.


While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Mortgage Express Limited for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication.

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