The biggest gripe for first home buyers is the amount of time it takes to save for a deposit. Low interest rates, the new KiwiBuild five percent deposit rules, and access to KiwiSaver can make a difference, but saving up to 20 percent of the price of a house - which can be as much as $164,000 in Auckland - can be a hard ask, especially if you are starting off at zero and the market keeps on rising.
OneRoof asked the experts to share their saving tips and tricks.
Financial adviser and Enable Me founder Hannah McQueen says first home buyers are unlikely to get to their magic number without some sacrifices.
“If you don’t trust yourself to not spend the money, transfer the extra money into a separate bank account – forcing the savings to happen,” she says
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Moving back in with the parents, having two jobs or having a “side hustle” will help build up savings fast, but eschewing takeaway coffees or giving up a weekly treat of avocado on toast not so much.
McQueen says if a $3.50 coffee is what gets you going in the morning and motivates to work harder, maybe it’s not worth quitting.
The experts say it's easy to analyse your weekly and monthly spending, and see where savings can be made, but taking action takes discipline.
Loan Market mortgage adviser Mikey Smith, 28, who is on his third property, knows all about discipline.
At the age of 22 he purchased his first property, a two-bedroom unit in Glendowie for $500,000 with a $200,000 deposit.
“It was super affordable for me back then even though interest rates were higher. I ended up not enjoying the mortgage payments and asking mum and dad if I could move back with them while I can rent it [the unit] out.”
While living with his parents, he then renovated the two-bedroom property and rented it out for $530 a week, which helped with mortgage payments.
In the next two years, Smith bought two more rental properties in Taupo, for $200,000 each. “I didn’t use any of my money for that, I started learning how the equity and property works,” he said.
Smith says a big saving comes from cutting out your monthly subscriptions on iTunes, Spotify, Netflix, monthly phone plans and more.
"Some kids have subscriptions from when they are 16- years-old and until they are 30 that can be thousands of dollars they are missing out on."
He recommends to stopping chasing the latest phone models or fashion trends until you can truly afford it.
“None of this stuff fits in with being able to build financial freedom and an early retirement."
At one point, Smith was putting aside 65 percent of his income; a term deposit account and discipline were his tools.
“If you have $500 a week you should try and save 20 percent. Look at your monthly bank statement and I guarantee you’ll find that 20 percent from stopping at the dairy, buying coffee, getting a snack at the petrol station.”
Smith is aiming to buy another two rental properties next year.
"It took me about 18 months of pure research after owning the first property to get confident enough to buy another one.”
KiwiSaver is another great tool that young people don’t use to the fullest, Smith says.
Instead of putting three percent of your pay towards KiwiSaver, increase it to eight percent until you save up for a deposit and then drop it back to three, he says.
He calculates that he personally missed out on $35,000 because he wasn’t using the scheme to its fullest potential.
He also advises cleaning up your spending habits before applying for a loan.
“If you have withdrawals from casinos or big bar spending, it’s going to stop you from getting a loan because it’s showing that you have poor discipline with your money.”
REINZ chief executive Bindi Norwell says normally first-time buyers are struggling to keep up with the pace of house prices when saving for a deposit.
However, REINZ's residential property data shows that Auckland region’s median house price has increased by a moderate three percent in three years from $835,000 to $860,000.
"For many first-time buyers, for the first time in a long time, their savings are not falling behind house price rises and that there is a chance for them to get a foot on the market."
