'Decided to go for it': First-home buyer says apartment costs $20 a week more than renting

A first-home buyer says owning a two-bedroom apartment in northern Auckland costs around $20 a week more than renting.

It comes as record-low interest rates make it cheap to borrow and raised house price caps in certain areas make it easier to get the First Home Grant. 

But rising house prices make it difficult to get onto the property ladder, with the nationwide average asking price reaching $839,035 in April ($1.099m in Auckland), according to realestate.co.nz.

After realising house prices weren't going to plummet after COVID-19 and looking for a first home that was "not our dream home but also not a dump", Randy Alingalan and his wife decided it was better to get out of the rent trap.

Their 2-bedroom apartment in Gulf Harbour cost $512,000, for which the mortgage repayments, body corporate fee and rates add up to just over $500 per week. As homeowners, they pay $20 a week more than the $480 weekly cost to rent a small house near Albany. 

"Knowing that our payments are merely [an] investment in our house that appreciates in value as opposed to paying rent where we just seem to throw our money away, we decided to go for it," Alingalan said.

Having saved a deposit over two years, using the "old-school" system of putting cash in envelopes to help them "spend wiser", the couple, who are migrants to New Zealand, used both of their KiwiSaver savings towards the deposit. 

With joint income less than $150,000 and as the apartment was under the $625,000 price cap for existing homes in Auckland, they were able to get the First Home Grant.

But borrowing the money wasn't smooth sailing. The couple had to adjust their sights on what they could afford not once, but twice.  

With no debt, a monthly savings record and money in KiwiSaver, they initially expected to buy a house worth $650,000. But they were approved for less than $600,000. 

Alingalan's small business, which he runs in addition to his day job, claimed losses which the bank viewed as an expense. Regular donations to their church also limited their capacity to service a bigger mortgage.

"The bank [said] if we would stop our donation to our church, we would get a higher loan amount but it was integral to our faith so we didn't," Alingalan explained.

Buying a decent property for under $600,000 "seemed impossible", but it meant they had an amount to work with and were able to narrow their search.  

"Once we got the pre-approval, that's when we seriously looked...no point salivating over houses that are well beyond our budget," Alingalan said.

Upon informing the bank of the apartment body corporate fee of $4000 (covering insurance, water and maintenance), their approved borrowing was reduced further. Alingalan now says that "was a blessing in disguise" as it meant the repayments would be lower. 

Initially "very hesitant" to buy an apartment, Alingalan said the apartment they eventually bought was more spacious than other terraced houses they'd seen. It came with a carpark and had guest parking, views of the golf course - and no lawns to mow.

"Although we chose to buy an apartment instead of a freestanding home, we didn't really compromise, because we loved the place," Alingalan said.

He urges other first home-buyers not to stretch themselves just to get onto the property ladder, otherwise "you'll spend more time working to pay for the house rather than living in it."  It's also important to like the property and be willing to live in it, even if there are plans to sell it down the track.

"If it's not time yet, it is not...that means more time for you to save."

For people considering buying an apartment, Sharon Cullwick, executive officer, New Zealand Property Investors' Federation said it's important to check the body corporate fee and the maintenance schedule, typically found in the body corporate minutes.

"Some properties can be quite cheap to buy but the maintenance is enormous...find out if they've got a maintenance programme and if there's any expenses coming up, e.g. recladding," Cullwick said. 

The Reserve Bank is forecasting annual house price growth to slow, from 21.5 percent in 2021, to 2.6 percent in 2023, which together with the Government housing announcement, offers some respite to first home-buyers.