Give young people hope.
We’ve read a lot in the media recently about how tough it is for new home buyers now that the Reserve Bank has changed the loan-to-value (LVR) ratio to a minimum 20% deposit for prospective home buyers. But there seems to be little offered in the way of lateral thinking to provide alternative solutions.
I realise it’s not a one-day fix, but to me the solution is clear. Why not make it possible for first-home buyers to buy a new home with just a 10% deposit, providing the home costs no more than $500,000-$550,000 and occupies a footprint of no greater than 100-110sq m? For people living outside Auckland and Wellington the cap should be $350,000.
This would enable more young people to get into their first home, which could include good-quality terraced housing. If you want to get ahead, you have to pay the price. For young people this means being willing to live further out of the city, as their parents and grandparents did, in order to afford a starter house. We can’t all live in Ponsonby or Herne Bay. Remember, the North Shore was initially built of 1000-1100sq ft houses. There’s still plenty of land available in the suburbs – in areas such as Whangaparaoa and in South and West Auckland.
The high price of land closer to the city makes houses unaffordable. And the new houses being built are too big and ambitious. Smaller sections outside the city and smaller houses make houses more affordable. They’re also quicker to construct. The solution I propose would get communities moving and help to address unemployment. It would provide work for the construction industry, as well as for the second-tier suppliers of interior fittings and fixtures, etc.
I think it’s been a common sense move for the Reserve Bank to insist that registered banks restrict the number of loans with an LVR of over 80%. Buying an $850,000 house on a 10% deposit can strain any relationship to breaking point. It should never have been allowed.
Fifty years ago, New Zealanders had to front up with one-third of the mortgage value. The balance of the deposit was topped up with cash or a second or even third mortgage. Admittedly, first-home buyers could capitalise on the family benefit, which is not possible now.
At Lochore’s we’re now already seeing the first wave of first-home buyers adjusting to the new terms and conditions and viewing $400-$450,000 homes instead of the $800,000 homes they might previously have considered.