First Home Buyer’s | 3 Reasons Why Now is Still the Best Time to Buy

We all want to be a first home buyer

It’s no secret that New Zealand’s inflation is causing everyone a whole lot of issues. Living expenses have increased, fuel prices have made us more weary of how we use our cars, and the list goes on. What scares most people looking to buy homes is the continuous rise in banks’ interest rates. The last time interest rates were this high was during pre-COVID times (around 3 years ago) and even in that market houses were selling at a cheaper rate compared to now.

So, why are we saying that now is the best time to purchase for the first home buyer?

It’s not just because we’re overly optimistic.

Housing has turned into a first home buyer market.

The rising interest rates have actually become a bit of a blessing in disguise. The side effect has turned out to be great for buyers who have backed off in the past year from purchasing properties because it was simply too expensive. Not to mention, the demand was so high that auction rooms were packed, so the bidding competitiveness was on an all-time high. Now that many are not wanting to take on a huge home loan, house prices have had to drop due to the decline in demand. It isn’t that great for sellers who are hoping to sell their properties using last year’s prices, but fortunately for first home buyers especially, it means that prices have dropped or at least calmed itself to a more reasonable price tag. Even ANZ has revealed that their Google search data on people looking for home loans have dropped, meaning there are fewer people on the market wanting to buy right now.

Changes with CCCFA, good changes this time! 

The Credit Contracts and Consumer Finance Act (CCCFA) was properly introduced in March this year, and if we’re being completely honest, this made getting a home loan much harder. There were a few rules that created more stress for first home buyers. One such rule was that lenders had to check the borrower’s regular spending habits and use it against how much they can borrow. This meant that they had to minimise the spending and stop their daily five dollar coffees. The worst part was, it unfortunately also included regular payments into their savings accounts. So all these rules meant potentially a complete change in lifestyle for the buyer, so they can maximise their home loan and get the house they wanted.

Now though, the government has relaxed somewhat by taking away savings payments as a ‘regular expense’. So, if you’re a super saver, this is great news for you!
Other spending habits, like the daily coffees or weekly takeaways, have become more flexible whereby borrowers can say they will change that spending behaviour. In essence, banks won’t necessarily use it against your borrowing power.

Kāinga Ora’s  First Home Loan product

Previously, you could only purchase a home in Auckland that topped at the 625k mark. In Auckland, that’s probably a one or two -bedroom apartment / unit and if you have a family, it will be a struggle with the limited space you will get.

The First Home Loan is a very special product from Kāinga Ora (Housing NZ), special in a way that there is no purchase price cap when it comes to buying your first home. Best of all, you only need a 5% deposit! They have also increased the salary cap for applicants. So, if you are wanting to apply on your own, the most you can earn is $95,000 a year, which is already quite high for a solo income. But if you and a partner (joint income) are applying together, the limit is $150,000.

For a struggling first home buyer, this is a significant helping hand, as you may be able to purchase a million dollar home as your first property. To put the icing on the cake, as a first home buyer, you will be eligible for the First Home Grant. Again, coming from Kāinga Ora, you can get free money! For a joint income application, you can get a whopping $20,000. There are some minor hurdles for this grant though. This has to be your first home, you would have to be contributing to the KiwiSaver scheme for a minimum of 3 years consistently, and you have to agree to live in the property for 6 months.

Easy right?