Getting onto the property ladder in Auckland is a challenge, but there are bargains around.
With interest rates at all-time lows and forecasts that house prices could drop 5-to-10 percent, first-home buyers could finally get a look-in.
But with current property sales figures showing strength and as Auckland is notoriously expensive - it's not easy to find a bargain. For buyers who are willing to shop around, it is possible to buy a 3-bedroom home for under $500,000 - they just have to look in the right areas.
Although Auckland's median price for a 3-bedroom home is currently $866,000, there are entry-level homes well-below that. The city commute would be longer and buyers should remember that a first-home is often a first step on the ladder.
“Your first-home is highly unlikely to be your ‘forever’ home, so it’s about getting a foot on the market and gradually moving ‘up’ the ladder over time and as your financial situation, lifestyle and needs change," REINZ chief executive Bindi Norwell said.
One way of getting onto the property ladder is to buy a 'do-up' in a less-desirable area.
According to Real Estate Institute of New Zealand (REINZ) sales figures over the 12 months from June 2019 to June 2020, the top five cheapest 3-bedroom family homes in Auckland sold for prices between $320,000 and $425,000.
Auckland's top five cheapest 3-bedroom homes sold in 2019/2020
- 3/27 Lagoon Drive, Panmure (townhouse), sold for $320,000 in September 2019
- 11 Kona Crescent, Henderson (townhouse), sold for $330,000 in July 2019 (freehold section)
- 14A Frank Hewitt Street, Pukekohe (residence), sold for $394,000 in January 2020 (freehold section)
- 2/37 John Walker Drive, Manurewa (residence), sold for $416,000 in April 2020 (cross lease section)
- 2/61 Redcrest Ave, Red Hill (residence), sold for $425,500 in February 2020 (cross lease section).
Source: REINZ (excludes apartments, units and homes with remediation issues, including leaky buildings and fire damage).
“One of the properties on the list [was] renovated over the last couple of months and is now listed for significantly more than it was sold for, showing that at this end of the market there are some excellent capital gains to be made," Norwell added.
Those wanting a quiet life could also consider Great Barrier Island. In March 2020, a buyer snapped up a house at 330 Shoal Bay Road for $290,000. Just over an hour's drive from Auckland and just up from Wellsford, there's also Te Hana, where in July 2019, a buyer picked up a cross lease 3-bedroom home at 35 Coronation Street, for $320,000.
Financial educator and property investor Lisa Dudson, said that paying off a mortgage is a form of "compulsory saving" that many people found hard to achieve while renting.
"Very few people have the discipline and skills to rent and invest their money so that they're in at least as good a financial place as those who buy a home and pay off a mortgage," Dudson explained.
She encourages renters to put a savings plan in place and work out the costs of both home ownership and renting, bearing in mind that homeowners pay for property maintenance, insurance and rates.
The 'best' area this year may not be so next year. Rather than trying to find the perfect property, first-home buyers should first be clear on what they want.
"Write down all the things you're looking for, then break them up into three lists: 1 – critical: things that are deal breakers; 2 – important: things that you really want but could probably compromise on at a push if you got enough of them; 3 – nice to haves but really you could do without," Dudson suggested
According to latest Trade Me Property figures, the national median weekly rent was $510 in June, $570 in Auckland.
Based on Auckland's median house price of $866,000 for a 3-bedroom home and a deposit of 20 percent ($173,200), assuming a one-year fixed mortgage rate of 2.55 percent over 30 years, weekly mortgage repayments would be $636: $66 above the median rent.
For those who buy a cheaper property of $350,000, using the same criteria, the weekly mortgage repayments would be $257.
"The biggest financial value is paying off your mortgage over time - if you have an asset and can add value along with renovations and/or modification, even better," Dudson added.