New kids on the block: the changing face of property investors

Savvy first home buyers are becoming more creative in a bid to get on the property ladder, according to BNZ Financial Futures Research.

The findings reveal the idea of the Kiwi quarter acre dream is changing, with many people believing the more achievable path to ownership is through property investment.

The research challenges the traditional perception that property investment is only the domain of the wealthy few who can leverage equity in their home.

Paul Carter, BNZ’s Director of Retail and Marketing, says we’re seeing a shift in the traditional path to home ownership.  

“We asked people what they were prepared to do to get on the property ladder and 44% of first property buyers said they want to buy an investment property, either in a cheaper suburb of the city where they lived or elsewhere in the country,” he says.

“We all know that New Zealanders have a reputation for their ingenuity and they’re showing it again when it comes to looking at all kinds of creative alternatives to buy their first property.

“Other trends our research showed were 30% of buyers are considering joining up with family to make their property ownership ambitions come true and 14% say they’d buy with friends,” Mr Carter says.

He says the key for anyone considering options such as buying an investment property or shared ownership is to do their research so they’re setting it up right the first time.

“It’s a great option if people do their homework and crunch all of the numbers before they invest,” Mr Carter says.

“For example, potential investors need to understand the cashflow and return on investment after expenses from a rental property. As you adjust to the first year of property ownership, you need to ensure there’s a little income left over after paying the mortgage to cover the cost of the rates, repairs and maintenance,” he says.

With the enthusiasm evident for property investing, there are a number of other things that people need to consider, including loan-to-value ratio regulations. These rules were relaxed slightly at the beginning of the year, which means many potential investors may be able to look at buying that much sooner.

Current legislation means buyers usually need a 35% deposit for investment properties.

In the regions, such as Manawatu, the median property price is approximately $289,000[1]and the 35% deposit would be $101,150, around half of what you need for a median house deposit in Auckland.

Opportunities for those tied to New Zealand’s more expensive locations could be to invest in a smaller unit or an apartment in a cheaper suburb, or combine their savings and buy a shared property.

An important thing when considering buying a house in a non-traditional way is to seek advice – BNZ can help make the finances simple and you’ll need to consult other experts such as a lawyer. Some of the advice they may give you includes:

• Draw up a property sharing or co-ownership agreement so you know what happens if one of you decides to sell.
• Establish the implications for you if another person defaults on their payments.
• Ensure you have an agreement on how to share the costs of ongoing bills, repairs and maintenance. 

In response to this research, BNZ is piloting a new event for people looking at alternative ways to get into the property market.

“Our ‘Buying outside the Box’ event is a chance to hear the experiences of those who’ve had less than ‘traditional’ paths to home ownership.

“After that, guests will get expert advice on what to do (and what not to do) from our specialists on design and renovation, the legal elements and of course our finance experts from BNZ,” says Mr Carter.

People interested in registering to attend the Auckland event can visit https://www.begoodwithmoney.co.nz/personal-banking/owning-a-home/buying-outside-the-box