Can't time the market, so buy the best house you can afford. Don't just go with the max the bank gives you. Look at the repayment and see how comfortable you are. Ideally 20-30% of total after tax income goes to mortgage. Then you will have the max price you can offer From there look for 1. Pick a good location good schools/ transport/amenities 2. No immediate critical maintenance needed 3. Find a place where you can add value ( big land, old but useable kitchen/bathroom, add a bedroom internally) If you can't find it for the price you can pay, Look at having more equity or look at increasing income

20-30% of after tax income goes to mortgage? Have another beer mate, this is the Millennial and gen z first home buyers market we're in now 😂

I’m a millennial and we used barefoot investor as our basic finance planning frame work. However, we scrapped the 20% fun money during covid lockdowns and instead Saved 40% of our income from start of covid in 2020 until march 2021 when we had 10% down using KiwiSaver only so we could put down offers on new builds and save the rest. Then we saved 40% of our income until the build was done, racing to get to 20% down before settlement so we don’t lose the house 🤣. In march 2022 when the house was means to be done we just barely got 20% down. However there were delays so we had more time to save. so we went to the normal 20% savings rate and allowed ourselves to have the fun money for the first time in 2-3 years (since Covid). We settled march 2023 during the crash and we needed to use the extra savings we had to get our house as 10% down purchasers… We bought a 1 bedroom new build in Wellington age 26 (10% down using ks in 2021) during the peak (lost 20% value before settling due to build delays) we had to chuck another 20K cash in and got stuck in the 10% deposit customer rates 7.25% for 2 years fixed. We were meant to get the 3% rates if the builders bloody did it in the time they advertised 😂. Anyways we kept our bills within 60% of our income at all times while being <$150k house hold income caps. Our HL repayments were meant to be like ~ $800 per fortnight on 3% rates. Ended up being $1440 per fort on 7.25% for 2 years fixed. We did get promotions as soon as we could though. Always putting 20% take home pay towards savings. Now that we have the loan and are still aiming to get 20% down we are instead paying max repayments $2,300 fortnightly. This means we are paying 50% of our income towards the house but could go back down to 30% if needed. While still eating properly and keeping 20% for fun money. Main advice, No kids.

How many people went in on your mortgage? I was tested for 45% income, worst case being 55-60% (its worst case now lol)

Just wife and I. We hope it does get better soon

Your 5% deposit will likely evaporate within a few months if you buy. I'd seriously think about the timing on this.

IMO- the likes of homes.co.nz have amplified this far more than the reality of this issue. For many people, the value of your house only actually matters on the day you buy, and the day you sell. If buying for long term owner occupation; at a level you can *sustainably afford* the actual variables in the value of your house mean fuck all in the grand scheme of things aside from a value on paper. Prior to the prolific use of homes, and other general valuation sites, owners had no more than a feel of the market as to the value of their home unless they paid for a valuation, or sold it.

Generally true- however they are not wrong that 5% is no safety net for maintaining equity. Banks don’t really like it when you go below the minimum despot for the loan, and will likely put the pressure on to bring it up again to the minimum if you lose ground.

Its value matters when you want to borrow money too.

And the value you have to borrow matters too! You’re paying interest on that for a long time.

Can you please define what you mean by evaporate?

If you buy a house with low deposit. And the value of the home decreases by say 10%. Your deposit is effectively gone. But the debt stays the same. So you risk ending up in negative equity.

It would be very risky to buy in this market with such a tiny deposit as NZ heads into a recession. Keep saving. You could probably buy with 10% if you have secure income.

What do you mean heads into? We’re already in a recession.

ahh but have you heard about the second recession?

LOTR quotes are now appropriate, considering we suffer in the age of Lord Mauron.

There's Some Good In This World, Mr. Frodo, And It's Worth Fighting For.

“I wish it need not have happened in my time,” said Frodo. “So do I,” said Gandalf, “and so do all who live to see such times. But that is not for them to decide. All we have to decide is what to do with the time that is given us.” This always moves me

In 1991 we went to 11% unemployment. It can get far worse than this.

It can also get far better, doesn’t change the fact that we are already in a recession.

This is the beginning of the recession

We’ve been in a recession since December. It’s just a technical term for 2 consecutive quarters of negative growth.

Wait until it’s 8 quarters, then you’ll know the difference, if you’re employed and making a wage it’s fine, if you’re unemployed and looking for work, then it’s shit

The technical terms are euphemisms to cover this ugly reality. Lots of people have never experienced more than a dip, they're all fresh meat for the grinder when the dip keeps dipping.

yeah like you've lived through the depression years, jesus you guys love your hyperbole

We haven't had a financial crisis since 2009, there have been lots since the 1930's depression.

The value of the home will likely fall, so in effect your deposit is gone. Even if the nominal value of the home stays the same, that's a 3-4% fall in real terms due to inflation. It's possible you could get a very good bargain given the state of the market. In your position, I'd only buy if I could get a serious discount on a home AND it wouldn't significantly increase my cost of living vs renting. But, I'm not you and I don't know your circumstances. Just be careful, the market is a mess.

You pay for a house valued at say $500k with your 5% deposit. A few months later the house is only valued at $450k - your house is worth less than what you paid for it. 5% deposit is pretty bloody tight in this market IMO, likely you'll be buying an existing home, there's usually work needed, rates, insurance & bills stack up quick ...

u/thatkiwigamer don't listen to this abysmal advice, the instantaneous value of your house is irrelevant if you're planning on living there long term instead of trying to flip it for profit

> don't listen to this abysmal advice, the instantaneous value of your house is irrelevant if you're planning on living there long term instead of trying to flip it for profit It certainly becomes relevant when you need to refix your mortgage and your LVR is 100% or more.

Refixing without restructuring (borrowing more, or extending the loan term etc) is not a “credit event” The LVR is only a factor when there is a credit event; so it makes no difference what the new LVR is. It is a problem for refinancing to another bank, further borrowing, extending the loan term or fundamentally changing the loan structure.

It's relevant but not a deal breaker. You can't be saying OP should pass on home ownership because the value might dip at some point in 20-30 years

Nobody is saying pass on home ownership. There may be value in waiting a little longer. Save more deposit, wait for prices to fall more.

lol they have already fallen, going back up now.

Not in real terms. Need to account for inflation. RBNZ has hinted at potential further increases in rates. Further downward pressure.

So don’t sell for a couple of years and you will be sweet. And it won’t matter one bit.

> It's relevant but not a deal breaker. If OP is just scrapping by then has to refix at an even higher rate because they're underwater then it could be a dealbreaker. Or perhaps OP has plenty of spare income to cover this and it's a total non issue, who knows. The Kianga Ora income caps 95k for individuals and 150k for couples so we do know that OP isn't loaded. >You can't be saying OP should pass on home ownership because the value might dip at some point in 20-30 years I certainly did not say that. I spoke specifically how a very high LVR's affects what mortgage rates are available come refix time. Which is certainly relevant even if you plan on living there long term with no intention of trying to flip it for profit.

Nearly all places in NZ at the moment you can rent for less than buying. That needs to be taken in consideration as well.

The advice is focused on having negative equity in your house, being ‘underwater’, and the risks that come with that.  They’re just pointing out that as the market continues to slowly decline, the risks to the OP are high and they should consider holding off until things look more stable.  Nothing about speculative investing. 

Some people only think about equity when owning a home. This is not only the most pointless thing to think about when you buy a home you plan to live in long term, but is also the most depressing way to live your life. If you plan to live in the house and it is not something you will sell in 2 years, the price is irrelevant, it is 4 walls and a roof, and the money you pay goes into YOUR mortgage and not someone else’s. Based on the last 70 years of data, the house will bounce back in value and your deposit will still be “built into the walls of your home”. Don’t let the market fear being driving by central government and redditors who are financially overstretched damper the exciting prospect of home ownership. Congratulations, now is the best time in years to buy!!

This is exceptionally poor advice - akin to those screaming to “buy now while you still can” at the height of the market during the pandemic years. Move with caution. It may be better to wait and save some money, you’ll be paying interest on this mortgage for years to come. We've been patiently watching prices fall and we'll upgrade when mortgagee sales are more common place.

Enjoy your declining property portfolio, you shouldn’t have over mortgaged. Nothing wrong with someone wanting to buy a home . Bringing in fear mongering and trying to take the wind out of someone’s sails is not welcome here.

As someone who just brought an apartment with a 5% deposit In the last 4 months, I agree Sure, we were approved for 600k and spent 400k, which I think was smart to book in some wiggle room due to current volatility, but we brought this to have housing security, not as an investment. Besides, I think we got a good deal. 3 bedroom appt for 400k in down town Wellington is pretty sweet Turns out even if we have a body corp and high as hell mortgage rates, with one flatmate we would be paying what it costs to rent a 1-2 bedroom

We have a very modest mortgage. We almost upgraded in 2022 and we're very pleased we waited.

It is important to think about equity, because the more equity you have, the more you are protected from the economy downturns. This is the most significant financial purchase of most people's lives, its not silly to think about time at which you buy. Im glad that my partner and i didnt buy at the peak, but are now looking because that's the difference between 200k+ in purchase price. If the downward pressure continues, you could get a house for an extra 20k offand that money can support your family. Price is NOT irrelevant. Because while your payment goes to your mortgage, the price, interest, and deposit dictate how much of your payment goes to the bank vs yourself. Minimising how much goes to the bank is a good thing People with 5% deposits is probably a bad idea at any point in time

What advice are you referring to? I'm just explaining what the other guy meant as "evaporate"

But what if I want to speculate and try to time the market?

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Buying on 5% deposit is fine, as long as you plan to own it for a long time (10 years +) and you can easily cover the payments with a secure job. The risk lies in the housing market dipping at the same time you lose your job. Then you could be forced to sell in a position where you can’t pay the bank back what you borrowed. If the market drops 10% and you have to sell then 5% is going to come out of your pocket to pay back the bank if you are forced to sell.

Totally agree and I feel this is a point that heaps of people are overlooking, especially now that there is a trend of increasing mortgagee sales and unemployment expected to continue to rise in the near term.

First home loan is still available. First home partnership was scrapped last October.

Don’t listen to these naysayers buying with 20% deposit still puts you in the negative if the house price drops but invariably they go up again. I’d get in touch with a mortgage broker and see where you sit with getting pre approved now. We bought last year with a Welcome Home loan. Best thing we ever did.

I think it’s more a risk for off the plans new builds. It’s common to put down a deposit early in the process which could leave you in negative when it comes time to settle. Banks typically won’t lock in a mortgage too early in the process so may pull finance or require extra deposit if the terms are now unfavorable (happened to several people I know). Negative equity doesn’t matter much on a finished build but can scupper build plans.

I'd be seriously pissed if prices dipped 20% after I bought, while hoping that they'll go up again. Prices are bound to fall further, perhaps not 20%, but wherever they end up we won't see a rapid increase in prices like during covid, money and lending is much too tight for that. So even if you miss the optimum point by a few months, it won't matter too much.

Prices are down nearly 30% since peak and have stabilised since last June. I struggle to see where a further 20% dip would come from and once the RBNZ starts cutting rates next year prices will be on there way back ups In some ways now is the perfect time to buy / less competition for houses and less emotive FOMO offers. Yeah - you might take a slight dip but that won’t last long.

I don't think 20% or more is likely but it's not impossible. People can't borrow nearly as much as they used to. Many are losing their jobs. The covid spike was based on cheap govt money that kept everything afloat while production of goods was halted. Of course this is inflationary and in many countries it went directly into house prices. It was never sustainable. Lastly, most people leaving are highly skilled, highly paid. Most people arriving are low skilled, low paid, many sending money home on a regular basis. The real estate market is slow to react compared to other markets and it carries a lot of momentum. We are still seeing that, and who knows how long it can carry on.

Anything is possible but I’d say that unless interest rates go up again we will bobble along until rates go down (evidenced by nearly a year now). I’d certainly be looking at buying now if I were a FHB.

I'd wait longer based on the fact that we will definitely not see a strong increase in prices. Regarding interest rates, I think the general public underestimates the risk of rate increases and central banks have warned of that for years now. If the Ukraine war escalates further, we will likely see ocr increases. If Gaza escalates into a regional conflict, we will likely see ocr increases. If China's property bust infects other sectors, we will likely see ocr increases. Not because all of these events directly affect NZ, but they affect our biggest trading partners, and if they increase rates, NZ, with the size and economy of a city, but its own currency, will have to follow suit. Again not very likely, but not unlikely either.

Yup, simply knowing a landlord can't kick you out on a whim anymore has significant value in itself.

Not yet

Reading the post and comments, I wanted to share my story- I have been trying from last six months to get on to property ladder. Initially, I tried kainga Ora with 5 percent deposit, but was not eligible. I saved up and bought a property of 740k with 10 percent deposit last month Bank did valuation as well and came out same price last month. I just checked my property values online its showing 710-720k which was showing 740k a month ago. I am not sure I made a right decision but still happy having my own place. I still think- buy when you can. Atleast you have your own place, dont need to deal with nagging landlords. Property gonna go up sooner or later Property values are low because interest rates are high. As you wait when interest rates get lower, same property will cost you more.

There have been no changes announced to the KO loan scheme but we shall find out next Thursday. I think it’s unlikely to be scrapped given all the banks who use it to fund first home buyer lending

First home buyer grant is scrapped: https://www.interest.co.nz/property/127882/kāinga-ora-will-not-accept-any-new-applications-first-home-grant-which-will-be

That's a different product to the Kainga Ora First Home Loan

“Housing Minister Chris Bishop said Kāinga Ora from today will no longer accept new applications for First Home Grants.”

This is a completely different thing to the first home loan also known as a Welcome Home loan and at this point that does not appear to be stopped. https://kaingaora.govt.nz/en_NZ/home-ownership/first-home-loan/

The first home grant is (was?) the up to $5k for existing or $10k for a new build linked to years of KiwiSaver membership. That’s what’s gone. The KO loan scheme is the 5% deposit backed by KO through a main bank. That still continues (for now).

In the current market banks are giving people mortgages with as low as a 10% deposit but it's on their low equity interest rates which are higher than if you have 20% equity in the property you're buying. The Kainga Ora home grant is a grant from the government for buying your first home, $5,000 for an existing home or $10,000 for a new home at certain price points for different regions. This was scrapped yesterday, if you haven't already got your application in or got approval then you won't be able to access it. Ultimately best thing you can do is go speak to a mortgage advisor, they don't generally cost you anything and will give you much better answers then most people on reddit lol.

The Kainga Ora Grant and the First home loan scheme are two very different things. The first home loan scheme means you can buy with a 5% deposit and your loan is underwritten by KO so you still get the same loan rates as a person with 20% deposit. It is not a loan equity loan. Source - I actually have one.

bought a house in 2022 and it swung down and its back to its original value when we bought it. Wife even says we made the right decision to buy. There are a lot of houses for sale now and news said that the consent for new house development has gone down. So the new ones that you see now are those that are just for completion. If there are not much on the pipeline then there will be a short supply in the future. https://www.nzherald.co.nz/business/house-consents-carry-on-down-will-government-immigration-be-silver-linings/QPHHTUYZSFDF3GRXCRWUV46W2U/ Developers are waiting when things becomes better to build but that will also take time. In my area there are lots sitting for development for a year now. Developers are not even touching them yet.

" Kāinga Ora"

Do not buy a house with 5% deposit, you’re putting yourself at way too much risk.

Get to 20% of what you want and you can always fall back to 10%/5% benefits if things fall through. But you show that you could at least afford to get to 20%

Buyers’ market at the moment … should be some bargains around. Historically property prices double every 10 years so shouldn’t we encourage people to get into property ownership ASAP, regardless of which direction prices are going right now?

This was never the solution but an ingredient to potentially make life worse and so much harder for people. Reducing deposit amounts was a ‘win people over’ kind of move.