Planning for a family home

Recently the Reserve Bank announced tougher new rules aimed at curbing investor purchasing of houses as the cost of owning a home has sky rocketed in Auckland and begun to rise significantly in other areas of New Zealand. The cost of housing in New Zealand is not a funny subject, especially to those young families looking for their first home purchase. I was amused however at the responses of some commentators, who explained various ways for investors to get around those rules, and the way that everyone acknowledges that there is a problem but at the same time pointing out why solutions being tried by government and communities will not work. It has become just as big a political issue as a financial issue.

I feel sorry for young families trying to get on to the property ladder but the fact of the matter is that the most of New Zealand’s population now live in rental accommodation and owning your own ¼ acre of New Zealand is fast becoming a dream for the vast bulk of New Zealanders. The housing market is a direct result of supply and demand, sometimes termed a ‘free market’ and like it or not there will always be someone willing to pay these exorbitant prices because they expect to make a profit either in capital gain or through renting properties at high rates. There is a risk of course as, like the pyramid schemes of the 80’s and 90’s there is a limit on how long the housing market will sustain this sort of activity and when it does crash usually it is the investors who got in last who suffer the biggest losses.

The unfortunate spinoff of investor purchasing of houses amid a market of increasing house prices is that many investors then rent those properties out at increased rentals in order to cover the cost of any loans used to purchase the property, their costs as landlords and any profit they think they can make on top. This then restricts the amount people are able to save for housing loan deposits as more money is required to be spent on rent. It is a vicious cycle and one that many people hope can be ended with a big lotto win.

 

Please don’t plan for a big lotto win, plan to have you and your family housed in an affordable, warm and safe home whether you rent or own it. If you want to buy a home then not only do you need to save for the deposit but servicing the mortgage, rates, maintenance etc then becomes something that needs to be carefully considered and you need to be prepared with a plan that includes your income and expected spending before, during and after the

purchase. If you need help putting a plan together you can always come down to the budget service and we are more than willing to help. Our service is free.

 

Pakanui Tuhura
Manager
Rotorua Budget Advisory Service