Exploring your options

A recent report on first home buyers in New Zealand reveals many Kiwis are tapping into their KiwiSaver funds with over 44,300 withdrawals in the year to March 2020. Low interest rates, high rents, uncertainty over overseas work and travel plans are all good reasons to think about taking the plunge and buying your first home in New Zealand.

But what are the options? We’ve pulled together five popular property options to help drive your decision making.

One. House and garden

Opting for an existing stand-alone house on a section, (aka the quarter-acre Kiwi paradise), has always been a popular choice for New Zealanders and still is. Prices vary a lot depending on factors like location, the size of the house and section, its age and condition. Properties in need of renovation often appeal to first home buyers because they’re usually cheaper to buy. They also offer scope to add value in the long run. However, DIY isn’t for everyone so it’s worth looking at the pros and cons of buying an existing home and section.

Pro's of buying a house and garden

  • Outdoor space.
    Room for the kids to play, a garden for flowers and vegies and a patio for the BBQ
  • Peace and quiet.
    No shared walls mean less noise and more space for you to feel comfortable at home
  • Freehold ownership.
    Generally these homes are freehold which means you also own the land. This makes it easier to put up a shed or other improvements as you won't need permission from the neighbours.
  • DIY potential.
    Room to upgrade or develop your property to suit your taste and needs as well as increase market appeal and value

Con's of buying a house and garden

  • High demand.
    Being a popular choice for many first home buyers, expect more competition to get this type of property.
  • Outdoor maintenance.
    Gardens need maintenance, especially come spring. If you don’t have the time, then you’ll need to pay someone to keep on top of it.
  • Property repairs and upgrades.
    Older properties might have essentials that need updating like plumbing, wiring, heating or piling. Getting a building inspection report is advised as part of any offer to help avoid unwelcome surprises after moving day.
  • Renovation scope and costs.
    DIY done wrong can result in disaster. Good intentions aren’t enough if you don’t have time, the skills, or the willingness to do the work.

Two. House and land packages

According to data from Statistics New Zealand residential construction reached a 45-year high in early 2020 with over 37,000 consents for new builds. Brand new can be appealing especially when bundled into a house and land package.

Pro’s of buying a house and land package

  • Cost.
    House and land packages usually come at a set cost you can budget and plan for. Plus, you won’t have to worry about competing against other buyers with multiple offers on a property.
  • Choice of home design. 
    There are typically a set range of house designs you can choose from and often a show home you can visit to get a feel for what you’ll actually get.
  • Close to facilities. 
    Many house and land packages are part of a new subdivisions which offer community facilities like parks and playgrounds as well as shops and cafes.
  • Lower maintenance.
    Buying brand new means less maintenance in the short to medium term. The workmanship of your property may also be guaranteed for a period offering you extra peace of mind.
  • Less time and stress.
    You get to make the fun decisions around fittings and materials leaving the difficult parts of the project for someone else to manage.
  • Schedule.
    House and land packages are usually faster to build than a bespoke option.

Con's of buying a house and land package

  • Limited designs.
    You get some choices on features, fittings, and layout but these are usually limited so you may end up compromising on character or individuality.
  • Less established neighbourhoods.
    House and land packages are typically in new developments rather than established areas. Trees and gardens can take a while to grow to create a more lived in look.
  • Location.
    Predominantly these types of developments are built on the edge of cities. This could mean longer commutes and moving further away from family, friends and regular activities.
  • Repayments while paying rent.
    If you’re renting while you're building you’ll likely need to start making repayments on the interest component of your mortgage in addition to paying your rent.

Three. Home and income property

Buying a property to live in as well as potentially earn money is an appealing option for property buyers including first home buyers. Unlike an investment property, home and income properties are typically a stand-alone house for yourself with an additional smaller self-contained studio or flat you can rent out to help pay the mortgage.

Pro’s of buying a home and income property

  • Extra income.
    Leasing the ‘income’ part of your home and income property can help with paying off the mortgage more quickly or fund home improvements.
  • Room for family.
    Greater flexibility for a growing family or relatives to live with you in the future.

Con’s of buying a home and income property

  • Maintenance responsibilities.
    You’ll need to ensure the property meets the required standards for renting and will have to be ready to deal with emergency maintenance and repairs.
  • Added Insurance costs.
    You’ll need to declare rental use to your insurer who may charge extra in premiums.
  • Extra admin.
    Being a landlord comes with obligations and admin like tax, vetting tenants and more.

Four. Apartment or town house

Apartments or townhouses are a good first home option for many Kiwis, especially in big cities where stand-alone homes with sections are unaffordable or located too far from the city centre for convenience. Most apartments come with unit title arrangements. This means you own a specific part of the complex, like an apartment, and share ownership of common areas like lifts, gardens and driveways. You share the costs of managing and maintaining the building and property with other apartment owners as a ‘body corporate’.

Pro’s of buying an apartment

  • Location.
    Apartments can be an affordable way to live close to the CBD in the main cities or popular areas where stand-alone homes are too expensive for a first home buyer’s budget.
  • Convenience.
    Leave the car and walk everywhere. Reduce travel times to work and play, especially if you’re close to good public transport.
  • Security.
    Lock up and leave with confidence there’s always someone around. If you live alone there’s an element of safety in numbers with neighbours close at hand.
  • Less maintenance.
    Generally you’ll be up for less maintenance than other types of homes though this comes with an ongoing cost.

Con’s of buying an apartment

  • Size.
    Your main trade-off is size. You may find yourself outgrowing your property within a few years.
  • Lack of Privacy/Quiet.
    You’ll likely be sharing walls so noise and a lack of privacy can be a potential issue.
  • Limited parking.
    You may not have guaranteed parking which could mean renting a space or going without a car altogether.
  • Body corporate.
    You’ll be part of group rules, regulations, and decision-making as well as ongoing costs to upkeep your property as part of the body corporate.

Five. Empty section

If you dream of creating your very own grand design, building a house on an empty section could be your ideal home. Sections come in different sizes and price tags, but location has a big influence in affordability. The good old days of the quarter-acre plot is more 1950s than 2020 according to recent research. However, if you can find the right empty section for your budget why not?

Pro’s of buying an empty section

  • Unlimited choice.
    Build the home of your dreams (budget and council rules permitting) or opt for a kitset home to reduce costs.
  • Flexible timeframes.
    You can decide when you want to build and move.
  • Modern standards.
    Your new home will likely be warmer, dryer and healthier than older homes due to modern building requirements.

Con’s of buying an empty section

  • Council and building restrictions.
    Depending on council regulations you may be limited in what you can build, what materials you can use, house height and colours.
  • Unforseen costs.
    Building a new home means more financial risk if things go wrong resulting in a budget blow out.
  • Delays.
    Weather and supplier issues mean there is no guarantee you’ll move in on your estimated date.
  • Location.
    Like newer builds, you’re more likely to end up further from the centre of town. (That could be a plus if you’re keen to live rural.)

Financing your first home

KiwiSaver can help you into your first home but it’s not the full story. There are multiple ways to save for a house. Here’s a quick summary of some of the common options for financing your first home:

  • Bank Mortgage.
    The most common and straight forward way of financing your home. The bank lends you money against the property which you pay back with interest. Kiwibank provide a comprehensive list of resources on the buying process and current interest rates.
  • KiwiSaver.
    In conjunction with a mortgage, your KiwiSaver balance (less $1,000 or any funds transferred from an Australian complying superannuation scheme) can be used to put towards your first home if you meet the requirements. You may also be able to access the First Home Grant of up to $10,000.
  • Kiwibuild.
    There are a number of Kiwibuild properties currently available across NZ that are designed to be more affordable for first home buyers.
  • Rent to own.
    These schemes aren’t common in New Zealand but becoming more popular. You purchase the property in conjunction with a third party and slowly buy the property out from them. The NZ Housing Foundation has a number of developments available across Auckland and Christchurch.
  • Managed Funds.
    For those unable to access KiwiSaver for their first home, a Managed Fund can be a solid alternative option to help build your deposit with greater flexibility offered than KiwiSaver.

Get into your first home with Kiwi Wealth

When it comes to buying your first home there’s a number of choices and decisions to make to ensure you get the right property for you. Whatever you decide, having KiwiSaver could help get you there. Learn how you can use KiwiSaver to access your first home with Kiwi Wealth.

This information is provided in a general nature only and should not be construed as or relied on as financial advice. This is not a recommendation to invest in a particular financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any investment decisions.

Past performance is not a reliable indicator of future performance. The value of your investment may go up and down.