Despite these apparent difficulties in the market, people on both sides of the Tasman are still managing to make that first step onto the property ladder. In October 2015, the Australian Bureau of Statistics (ABS) reported that over 15 per cent of all housing finance commitments came from first home buyers, while according to the Reserve Bank New Zealand that same figure was over 11 per cent across the ditch.
So, if median house prices are as prohibitive as you may have been led to believe, how are all of these first-timers managing to buy a house? More importantly, could you join their ranks?
People on both sides of the Tasman are still managing to make that first step onto the property ladder.
While Interest.co.nz reported in November that the national median house price in New Zealand had fallen slightly on the previous month, the fact remains that growth over the year was still 6.9 per cent. Based on the median of $460,000, the monthly Rent or Buy Report calculated that servicing a mortgage (at current interest rates) costs 27.6 per cent of average household income.
Compare that with the median rental price, which according to the report requires 24.1 per cent of income. That extra 3.5 per cent is by no means an insignificant amount, but it might fall into the realm of possibility for many young families who are currently renting.
The difficulty may come from accruing the necessary deposit for a mortgage, which Interest.co.nz estimates will take a typical household 3.7 years.
Calculating housing affordability is more complex in Australia, given the varying economy from state to state and the differences in the housing markets between regions. On a nationwide scale, however, the ABS found that the percentage of income spent on mortgages by families with home loans was 16 per cent in 2013-14.
Somewhat surprisingly, the percentage of income spent on housing costs for private renters was found to be higher – 20 per cent over the same period. The suggestion is that it may in fact cost people less each week to pay down their mortgage than they would be spending in rent.
However, it pays to keep in mind the huge variation in median Australian house prices – in November, CoreLogic RP Data reported $925,000 in Sydney, compared to $326,000 in Hobart, for example.
Getting to the point where you have enough saved to take out a home loan can be a real challenge.
As mentioned above, no matter how small the week-to-week difference between renting and buying a home is, getting to the point where you have enough saved to take out a home loan can be a real challenge. You will need all the help you can get, but never fear – the government is here to assist.
Through the Australian government’s First Home Owner Grant scheme, each state and territory offers incentives to help you along the way – as much as $15,000 (in Queensland) towards your deposit. Before speaking to your mortgage broker, it pays to check out just how much assistance you might be eligible for.
In New Zealand, meanwhile, the Welcome Home Loan scheme allows first home buyers to purchase a house with a lower deposit, potentially cutting the amount you need to save in half. Conditions obviously apply in each circumstance, but if you are eligible for all or some of the grants, they can be that extra push you need to unshackle yourself from the cycle of renting and into home ownership.