Is it a good time to buy? How much do I need to save? Will
I be able to get a loan? These are all common questions for
those thinking about buying their first home. Otago Daily
Times reporter and recent first-home buyer Vaughan Elder
spoke to those who work with those entering the property
market in an effort to answer these questions and find out
how some of the frequent pitfalls can be avoided.
With interest rates at record lows, house prices down from
their peak and loans easier to come by than they were in the
aftermath of the credit crunch, now is undoubtedly a good
time for first-home buyers to enter the market.
The fact many first-home buyers can withdraw from their
KiwiSaver accounts and are eligible for a first-home deposit
subsidy - of up to $5000 per person - has meant many can buy
earlier than they otherwise could have.
However, despite these conditions the process of getting
together the money and then buying a first home - which for
many people will be the most important financial decision
they ever make - can still be a daunting one.
Nidd Realty property salesman Graeme Pennell said buying a
property was something most New Zealanders aspired to.
''I think most New Zealanders at a reasonably young age
realise the benefits of buying a property.
''It's very much a New Zealand thing.''
Home ownership was also an investment that usually did well
for people, he said.
''It's a way of people accumulating wealth while having a
place to live that people can make their own.''
However, entering the property market was ''not as
straightforward as a lot of people assume it to be''.
''What often happens, I find, is that people start looking at
properties and they haven't really done their information
gathering ... and so they get a few surprises,'' Mr Pennell
These surprises included people finding out they were unable
to borrow as much as they had thought they could or not being
able to use their KiwiSaver in the way they expected.
In order to avoid these nasty shocks it was important to
''arm yourself with information'' by forming relationships
with key people before seriously looking for a house, he
One of the first things people should be doing was to speak
to a financial adviser about the benefits of KiwiSaver and
using it as a deposit.
It was also wise to speak to a mortgage broker, who would be
able to give advice about how much you could borrow.
Doing this, as opposed to sticking with a bank you were with,
could get you better interest rates.
''It's all free, so why wouldn't you?'' he said.
It was easier to get money from banks than it was a couple of
years ago, during the peak of the global financial crisis, Mr
''We went through a period a couple of years ago where
financial institutions had bad experiences of people unable
to meet their commitments.''
This meant for a while loans were harder to come by, but
since then the situation had ''eased up'' considerably.
There were also more controls in place to stop real estate
salespeople from taking part in unsavoury practices.
''I think we are in a lot better environment now than we used
to be. There are a lot more safeguards in place to protect
consumers and I think banks are being a bit more thorough in
their checks as well.''
Added to this, the reduction in interest rates, the option to
use KiwiSaver and a reduction or flattening of property
prices, meant it was a good time to enter the market, he
Mortgage broker Glenda French, from Mortgage Link, said in
order to get a loan approved there were a few conditions that
needed to be met.
When it came to borrowing, people typically either needed to
save a 5% deposit or else apply for a Welcome Home Loan,
which allowed first buyers to borrow up to $200,000 without
any deposit. Then, for properties worth more than $200,000
and up to a maximum of $280,000 they would have to pay 15%
deposit, but only on the amount over $200,000.
There were often special conditions attached to low-deposit
or zero-deposit loans, usually requiring applicants to have
worked in the same industry for at least six months.
Some banks also charged a penalty interest rate of about 0.5%
for people who had a deposit of less than 15%.
To get a loan approved, the house itself also had to be
''So, if there was deferred maintenance, the bank may deem
the house as not being suitable security and may not lend on
People also needed to know if they could get insurance on the
''It's increasingly something that you need to have sorted
before you go unconditional. We haven't had one not be able
to settle because of an insurance issue, but you do have to
have it sorted,'' Ms French said.
Mr Pennell said when it came time to make an offer there were
still important boxes to tick off.
You needed to be aware of what to make an offer subject to.
''It's often wise, unless you have got an absolute cast-iron
guarantee, to make an offer subject to finance, just as a
It was also prudent for people to make offers subject to a
This meant if faults were found, the buyer could negotiate
post-contract to have the issues remedied, either in the form
of a price discount or else having the issue repaired before
''It's money well spent ... particularly if there is any
doubt. Sure, you might spend $500 and you might not buy the
property in the end, but that will have saved you a lot of
heartache,'' he said.
Dunedin City Council building services manager Neil McLeod
said requesting a Land Information Memorandum (LIM) report on
a property before going through with a sale was another way
to avoid nasty surprises.
LIM reports gave potential buyers information the council
knew about a property, including recent building consents,
building permits, information about land stability and
It also revealed if the council knew of any problems with the
property, Mr McLeod said.
Problems that could turn up included the possibility there
was a consent running live on a property, or the section
could have geotechnical limitations. For instance, some
properties in the Dunedin suburb of Fairfield could be on top
of old mines.
Those who did not obtain a LIM report risked having to spend
thousands of dollars getting work that had not been permitted
up to compliance.
''Sometimes it's just a matter of us doing a final inspection
and if everything is in order then we can issue the code
compliance certificate for virtually no money whatsoever. But
it can also mean when we get there we find there is quite a
lot wrong and you could be talking tens or hundreds of
thousands of dollars.''
''That's why you really want to check where things are and
what we know about it before you make an offer.''
People who went ahead with a sale without a LIM report also
risked not being able to use the property as they planned.
''For example in 2007 and 2008, when the real estate market
was booming, it wasn't uncommon for people to turn up at our
front counter and say `look, I have just bought this house
and now I want to put a garage in the backyard'. We would say
that's great except we have got a big sewer running through
the backyard, so no, you are not going to do that.''
The key message was ''it's much easier to sort it out before
you are the owner, rather than buy it and then find out you
have problems'', Mr McLeod said.
At $275 for residential properties, buying a LIM report from
the council was ''cheap insurance'' and could save a lot of
A partner at O'Neill Devereux, Todd Whitcombe, who is a
member of the New Zealand Law Society's property law section
executive committee, said a common mistake he came across was
people not giving themselves enough time to get all the
paperwork sorted out, particularly in relation to KiwiSaver.
He had dealt a few clients who had missed out on money
because they left it too late or overlooked requirements.
Mr Whitcombe said it was the lawyer's job to keep home buyers
informed and be ''frank and honest'' with them.
If lawyers were being ''evasive about providing information''
or were not doing their job properly, people could lodge a
complaint with the New Zealand Law Society, but it was always
best to consult a lawyer about the issue first.
First-home buyers looking for a lawyer should ''ring
around'', in order to get value for money and make sure they
were getting someone who was well versed in the area of
People needed to realise this would probably be the ''most
significant'' purchase in their lifetime.
''We are here to look out for you,'' he said.
Mr Pennell said when it came to the question of what was the
right house to buy, the answer depended wholly on the person.
People needed to ask themselves if they wanted a
''fixer-upper'' or a house with very little in the way of
There had been a shift in recent years away from DIY and more
buyers were looking for houses ''where the work has pretty
much been done''.
However, if people were open to doing work, they could look
at a wider range of properties.
Not everyone bought a house with a mind to the amount of sun
''Some people don't mind compromising on sun, because often
if you compromise on sun, then you might get a wonderful
Diane Rohtmets, who has just been through the process of
buying her first home with her partner, said it was a good
idea to get advice from people who had already been through
''A big thing for us was that his friends have bought houses
in the past and so they knew kind of what to look for.''
A major reason why she and her partner decided it was a good
time to buy was because the market was so good.
''I get the feeling people are just going for it, if they see
something that they want, because it won't last.''
Buying a first home was part of growing older and becoming
more responsible, she said.
''I feel more grown up. I feel like I have got more
responsibility, because there is something that I have to
look after, in order to preserve it.''