Ten years ago, a buyer would have taken about nine years to save the deposit and would have spent just under $140,000 in rent over that time.<\/p>\n
CoreLogic chief property economist Kelvin Davidson said the calculation gave an approximation of what a typical first-home buyer might have spent, but because the data was not inflation adjusted, it might not reflect the full impact on buyers in the past.<\/p>\n
\u201cBecause it\u2019s not relative to incomes, I think it probably makes things look a lot worse than they actually are,\u201d he said. \u201cThat said, if you look at our rent-to-income ratio measure from our housing affordability report, which is a normalised measure \u2026 at the moment, it\u2019s basically at a record high.<\/p>\n
\u201cThe conclusion holds that renters right now are paying more of their income towards rent than they have done in the past.\u201d<\/p>\n
He said, while rents had been flat or even slightly down recently, rental growth would likely resume before long.<\/p>\n
While the years-to-save measure had dropped from as high as 12 years in 2021, it was high compared to previous years, but Davidson said first-home buyers were still active, even with renting posing a challenge.<\/p>\n
\u201cThere are lots of first-time buyers in the market.\u201d<\/p>\n
He said there was an incentive to buy, because in some cases, people could save money on a mortgage payment compared to rent.<\/p>\n
\u201cIf you can get out of paying rent \u2013 expensive rent \u2013 there\u2019s an incentive there.\u201d<\/p>\n
The years-to-save measure also assumed buyers needed to amass a 20% deposit, he said, while many bought with less than that.<\/p>\n
In July, more than $1.1 billion was lent to borrowers with less than 20% equity or deposit.<\/p>\n
Davidson said, whether it made sense to keep renting to try to get to that threshold or buy earlier would depend on the individual.<\/p>\n
At 20%, borrowers could generally access better interest rates.<\/p>\n
\u201cEven with modest house-price growth over a period of time, with the benefit of leverage, there is an incentive to get as much house as you can as soon as you can,\u201d he said. \u201cIt doesn\u2019t take a lot of capital growth for that to hold true.\u201d<\/p>\n
Davidson said lifestyle choices and other factors would affect a decision.<\/p>\n
\u201cYou might have a high hurdle to get there, but … you can change other parts of your spending, curtail other aspects to enable you to pay the rent and save that deposit.<\/p>\n
\u201cThat\u2019s what people are prepared to do to get the house.\u201d<\/p>\n
David Cunningham \u2013 chief executive of mortgage advice firm Squirrel \u2013 said, when prices were not falling and if people could afford the payments, being in the property market rather than saving up more of a deposit made sense.<\/p>\n
\u201cOver time, house prices invariably rise,\u201d he said. \u201cThis is because, with targeted inflation of around 2% over the long term, it provides a natural floor for house prices, as construction costs are rising.<\/p>\n
\u201cHaving a mortgage instils an inherent savings discipline. You can\u2019t avoid mortgage payments, so they \u2018eat first\u2019 in a household budget.<\/p>\n
\u201cIt\u2019s a bit like KiwiSaver \u2013 pay yourself, or in this case, your mortgage first.\u201d<\/p>\n
He said people who used KiwiSaver for a first home could get back to saving for retirement earlier.<\/p>\n
\u201cThe difference between a 10% deposit and a 20% deposit could be several years of saving, versus owning the house now.<\/p>\n
\u201cReducing the loan balance, alongside increasing house prices, if that happens, can often reduce the loan-to-value ratio below 80%, which unlocks standard interest rates. My observation is that the longer the runway between buying a house and starting a family, the easier things will generally be.\u201d<\/p>\n
He said the most important aspect of the decision was affordability.<\/p>\n
\u201cIf you can afford the payments with the extra interest loading, if the LVR is over 80%, then consider getting started on the home-ownership journey.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Ten years ago, a buyer would have taken about nine years to save the deposit and would have…\n","protected":false},"author":2,"featured_media":39551,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[33323,33182,16574,138,3237,20392,813,36023,111,139,69,16401,11590,812,61],"class_list":{"0":"post-39550","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-10year","9":"tag-33182","10":"tag-bill","11":"tag-business","12":"tag-buyers","13":"tag-deposit","14":"tag-edmunds","15":"tag-firsthome","16":"tag-new-zealand","17":"tag-newzealand","18":"tag-nz","19":"tag-rent","20":"tag-save","21":"tag-susan","22":"tag-to"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/39550","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=39550"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/39550\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/39551"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=39550"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=39550"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=39550"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}