It’s too easy, for those of us who have somehow managed to scrape into the hallowed ranks of Auckland homeowners, to fall into the trap of blaming everyone else for their own poor financial choices and unrealistic expectations.
I’m determined not to do that.
I know that simply cutting back takeaways is not going to get you into a house.
I know that rents keep rising; when I was at university $350 a week got you a three bedroom rental in the humble suburb where I grew up, and today it gets you a one bedroom.
I know that prices and incomes are all out of whack, and yet, the way things are here, it generally makes sense to buy if you can.
Basic housing – dry, warm, healthy, affordable even – is a luxury in Auckland and it shouldn’t be. Renters are treated as second class citizens in every way. The quality of rental housing is abhorrent. There’s no stability. I note without pleasure (okay, maybe a LITTLE grim pleasure) that relatively well-off media commentator types who once often spoke out about what a waste of money it was to buy a house have now started families and oh, promptly gone and purchased property to live in.
NCEA Maths Lvl 3: If someone on $60k needs to save 20% on a $600k shitbox that goes up $100k each year, while paying escalating rent… How?
— Damian Christie (@damianchristie) April 26, 2016
I’ve put off writing more about the nitty gritty of buying my house – the financials, that is.
In a way, I feel like I haven’t truly earned it. And maybe more importantly, I’m nervous about the inevitable judgement that’s going to come my way.
Do I owe anybody any details? No. But might transparency benefit someone else out there? Maybe. And if the struggling house hunters who opened up about their finances for the Herald’s Home Truths series can do it, I probably should too.
Here it is.
Based on my pre-approval, I was looking at houses $500k or less, using the Welcome Home Loan scheme (allows first home buyers to get in with 10% deposit, subject to other conditions). The majority of my deposit came from my KiwiSaver. (It’s never been affording mortgage payments that poses an issue, but rather the down payment.
Based on 15% price rises and current median price, in Auckland you need to save $473/week just to keep pace with deposit appreciation.
— Matt Nippert (@MattNippert) April 22, 2016
At this point I was temporarily staying with my parents due to a relationship breakdown (though still paying rent at my flat), and they were helping me house hunt. There wasn’t a lot in my price range at all, let alone properties that were actually fit for residence. The two places in my budget that I wanted to make an offer on (though I was pipped to the post on those) … let’s say my dear mum wasn’t very impressed with the properties.
But as I told them: beggars can’t be choosers, and I’m a beggar in this market. My criteria is whatever I can afford, and within that, whatever I think I can live with. I was prepared to compromise on various things as required – basically anything, although not everything. Slim pickings weren’t necessarily a negative. I’m chronically indecisive so a narrow range of options was actually a good thing for me.
They also offered to help out, moneywise. I was very appreciative of the offer – and also very reluctant to accept it. My preference was to buy within my original budget, on my own steam, but together we started looking at some more expensive properties as well.
The more we looked, the more it made sense. The phrase ‘cutting off your nose to spite your face’ comes to mind.
The prospect of them topping up my buying power went against my core principle of Doing Things On My Own. And yet they genuinely wanted to. Rather you pay us than the bank! It would mean a better house – still absolutely in entry level territory, but more liveable and better located. And importantly, potentially a forever home. I’ve moved so, so much while renting and it has been exponentially more soul destroying each time. I always wanted to buy a house and then never move again if at all possible. I just can’t imagine dealing with the stress of moving PLUS throwing the logistical headache of both selling and buying into the mix. Obviously people do it all the time, but I can tell you right now that climbing the property ladder is not for me.
The final price for my house was $595k, so with them making up the difference, means I owe them close to $100k. A little less than that now, after a few months of repayments.
So in the end, I didn’t take a Welcome Home loan, just a regular one – but it worked out for the best. As a result, the rest of the loan process was a lot simpler and shorter (less paperwork). And I didn’t get the $5k government HomeStart grant, but that would basically have been cancelled out by the Housing NZ premium applied to the WHL anyway. Turns out that’s a bit of a wash as a single income home buyer…
Where to from here?
Withdrawing KiwiSaver money for my first (and hopefully last) home puts a major dent in my retirement savings, it’s true. But I’m comfortable with that choice, having pondered it for a couple of years, and still being young with time on my side. Saving for the future is important – but so is having a stable and healthy living environment in the present.
And while I don’t see my home as an investment, having a paid-off house will be a huge benefit come retirement. There’s a lot of talk right now about how Generation Rent will be at a disadvantage in this regard, and for good reason. Having discussed this with people at work who know much more about finance, mortgages and the economy in NZ than I do, I feel confident in this decision being the right one for me.
Probably more painful – emotionally anyway – is the fact that I accepted family help. Now I’m just like basically every other Auckland homeowner my age. Even as a loan rather than a gift … this makes me one of those awful privileged millennials tapping into the Bank of Mum and Dad. Let me tell you, that stings.
But pride ain’t everything, and I’ve said before that I wouldn’t look a gift horse like this in the mouth should it cross my path. I’m happy (understatement: DELIRIOUSLY HAPPY) and apparently so are they. A win-win, I suppose. Heck, for health reasons alone, I can tell you it has been so, so worth it already! I rub rosehip oil into my stress scars each night (from the chronic eczema that literally evaporated once I moved into my house) and I know I made the right choice. I pinch myself most days, wondering if this is actually my life, and feel so grateful to be here.
Honestly unless you’re an investment banker, it’s impossible to buy a house in Australia (and New Zealand) BY YOURSELF as a young twenty-something. Both my partner and I earn decent incomes, but even if we hadn’t gone overseas, we wouldn’t be able to buy a property in a suburb within an hour and a half commute from work. Parental help is necessary – sad, but necessary for most people of our generation.
Oh wow, you have no idea the relief I feel reading this. I’m super frugal but according to all my calculations there’s no way I can pull off buying a house on my (single but decent) salary, so when I read that you’d done it, I simultaneously wanted to high-five you and then run the numbers of my budget another 15 times, anxious that I’ve been overly extravagant or luxurious in my expectations and lifestyle. I feel heaps better knowing your folks are in the mix (and I’d totally do the same if I could! Nose, face, etc).
Love to talk about this more sometime if you’re free at lunchtime soon 🙂
Strike 1: single income. Strike 2: non corporate salary. Still, worth talking to a broker if you haven’t yet…! Let’s definitely, will arrange something in the next couple weeks!
I wouldn’t look at it so negatively. You’re in a tough situation, your parents gave you a loan, not a $1 million house. And one thing I’ve noticed about immigrant parents (I’m an immigrant here in the US although I spent most of my life here), they’re more likely to help out on situations like this without any strings attached (I suspect immigrants in NZ are no different), probably because they understand the struggle. The other day, my mom offered me a $40k interest free loan to pay off my student loans. I declined it because I don’t need it and I’ll have them paid off in a year anyway, but that’s just how they are.
I think that’s part of it for me – THEY struggled and THEY did it all on their own, you know?
But things are genuinely different today than they were back then, to a massive degree.
Your last sentence sums it up nicely…grateful that is… we are first generation NEW migrants. When we first came to New Zealand a little over 2 years ago, we where hopeful to buy that house… but as house prices are increasing like a car without brakes, the goal turned into a dream, then simply wishful thinking.
Thanks for this post. I guess will just continue to save for that down payment, and see what opportunities may come our way.
eric and i saved a crap ton to buy our house, and didn’t get help from either set of parents, BUT–i see absolutely no way how our children will be able to afford to live here unless we help them. Already, we purchased the cheapest and smallest house in our neighborhood and even that was a stretch for our budget. We are quickly outgrowing it and I am wondering how in the hell we are going to afford a bigger place. I can only see us renting for a couple of years and hope the market goes back down?? I have no idea…
I think that’s exactly what went through the minds of my family, because that’s the current state of things in Auckland.
If I had a partner who was fully employed and earning over the years we’ve been together, I think we could have bought this house on our own. Unfortunately, that was not the case. But buying on my single income is ultimately a better and safer outcome.
I’ve been reading your blog on and off for a wee while. I live in Auckland too. I’m curious as to what you bought (apartment/unit?) and roughly where (if you’re able to disclose).
I’m currently renting and living frugally but interested in buying. I’d love to live in a 2bdr apartment or unit close to the city… but just curious to see how/where others are making it happen!
Congrats by the way!
Hey! It’s a 3 bed in Henderson (closer to the Valley end). I looked at 2 and 3 bedroom units and houses mainly around Glen Eden, Henderson, even Massey and one past Swanson. A few other random ones in Mt Wellington, Pakuranga, Birkdale. (I personally have no interest in apartment life, having done it before … not to mention the body corporate fees and higher deposit requirements). I’m used to living 3 public transport stages out of the city – have done most of my life, minus about 3 years in Mt Albert/Mt Eden – so adding one more wasn’t a biggie, and I was prepared for it.
I might do a ‘life with mortgage’ budget breakdown but tbh, still settling into a financial routine after buying various necessities, life with dog and other personal upheavals… so that’s probably a while away!
Awesome, thanks for sharing. And congrats again! 🙂
My feeling is that privilege doesn’t make you a better or a worse person, just like struggle-for-its-own-sake doesn’t make you more or less noble. Perhaps if you want to ameliorate your guilt you can work hard and pay it forward by improving your children’s lives (if you end up having kids) or bettering your community.
Otherwise, I’d just own it. You made a sound decision that was better for you and was within the realm of feasibility for your family who offered to help. Anyone who might fault you for it would have, if they’re being honest, probably done the exact same thing.
^This. All day. It took me a long time to be comfortable getting help from my family. They don’t provide with money, but with childcare. Excessively. It was hard at first, but it’s what makes life possible and better for our family. I hope I’ve said it already, but if I haven’t, congrats on the house!!
When I am a parent if my kid isn’t a pain in the a@@ or a slacker (it happens) I would be more than happy to help them purchase a home. It is a long standing tradition for families to help one another so I don’t think you should feel guilty at all about getting help from family.
I haven’t been to your site in forever. A lot has changed since I last visited. Congrats on all the changes and moving in the direction you need for you.
I was floored by the housing in NZ and that was 10 years ago. Immigrant families help each other financially. The multigenerational interdependence of immigrants is something a lot of western cultures don’t get. It’s only a bad thing if it’s one sided. If you’ll be there for your parents when they need you, financially or otherwise, then it’s all good.
Thanks for sharing. I think the reality is it is very difficult to do it without help. Nothing like a mothers judgment to help it along. We borrowed the transaction costs on our first place from my parents and paid it back. I actually think parents like to help, as long as the offspring has made a good effort, which obviously had already done. Enjoy!
We started looking at houses early last year but stopped when we realise we aren’t going to get something we like with the amount of money we are willing to spend. It doesn’t help that I’m okay to start small but my partner is very particular with what he wants, and because he has more money (most of the deposit), I think it’s fair that he gets the final say on what we spend it on. I think it was great that you accepted help from your parents, they would’ve probably felt bad if you rejected their offer. I’ve done this so many times to my parents, although none of them has offered help this great, and they both told me at one point that I don’t have to be to proud all the time and that even though I’m all grown up, I’m still their child and it brings them happiness to help me and to feel that I still need them.
Yay for happiness and for getting rid of stress-related eczema! I hope one day I get to write something like this too. 🙂 I hope all’s well with you!
Late to the party here, I think I missed this post on its original publication! I just wanted to say thanks for posting this and sharing your story. It’s heartening (and rare!) to see a young person/Auckland real estate success story, so yay! 😀
It’s inspiring to me personally – I’ve also been the long-term breadwinner in my relationship, something that I don’t see talked about a lot, so I appreciate the way that you mention this aspect of your life on your blog. I guess it’s not necessarily a main theme, but it stands out to me as someone in a similar situation. I dream of home ownership, but my financial picture is pretty different than someone who has been in a dual-income couple and consequently been able to save heavily. (And in my case, I wasn’t in decent-paying work through my 20s, heh). I’m quite interested in how you make it work financially, because even though you bought a most place, and assuming that you have quite a high income, it seems like your mortgage must consume a huge percentage of your take-home pay. I’m wondering if there’s some trick I’m missing in my own calculations/dreams of home-ownership …?
I understand the mixed feeling of accepting parental help, but if either of us were in their shoes, we’d feel the same way – I wouldn’t want to see my (hypothetical) children scraping by while I had cash to spare.
And it really is extremely hard to get on the ladder without parental help these days – that’s cold hard reality.
Here’s a question – do you think you’d be able to do it today, that is early 2019, with the way property prices have kept rising?
Thanks again for the post 🙂
Prices have kept rising since 2016 but at a slower pace than the previous trend… I still stalk Trademe listings on the regular! There are definitely properties in my price range still, and there have been periods where there’ve been quite a few actually. I still haven’t seen any that I would prefer over my house, but I do think there would be *some* options today.
So I didn’t have very much cash at all for my deposit, only something like $10k (with T being unemployed/underemployed for almost all the time since we got back from travel in late 2013 – otherwise I/we would have had so much more cash saved. That’s why I was temporarily staying with my parents – I initiated a separation at the end of 2015.) The rest came from my KiwiSaver. I was on around $50k or so contributing 4% from when I started work, until at age 25 I got a job paying $65k and upped contributions to 8%. A year later I landed an $80k job and about 8 months after that is when I bought. Payments were about half my net income, but T got his crap together and got a job, and came along. If he hadn’t, I’d have looked at Airbnb/getting a flatmate to move in pretty quickly. I realise 50% is a stretch that’s not for everyone! With both our incomes I think it wound up being more like 35% of our total takehome maybe.