- Date published:
7:00 am, March 7th, 2021 - 75 comments
Categories: babies, capital gains, cost of living, Economy, employment, families, housing, jobs, kiwisaver, Media, the praiseworthy and the pitiful - Tags: deposit, first home, housing market, magic money tree, property ladder
So, you want to buy your first home? Firstly, congratulations! You have joined or will join the large but slowly shrinking team of rational Kiwis who think ahead and look at the future. Indeed, why toil away your life paying dead money into somebody else’s mortgage?
It is said that our economy is a housing market with bits bolted on. Sadly, this has more than a ring of truth to it. Apparently, there are hundreds of billions of dollars slushing around in our housing market, all mostly (!) tax-free. No wonder all this capital will never find its way to other ways of investment, e.g. to lift productivity and our overall standard of living. This legal Ponzi scheme only works if and as long the money stays tied in the housing market. The media, banks, insurance companies, real estate agents, politicians, your friends, family, and work mates, your children and even clairvoyants will see to it that nobody sings out of tune and deviates from the path of rational orthodoxy – I cannot think of the name for it.
As first-home buyer you will have undoubtedly done your homework and sums and worked out that paying the mortgage is only slightly more than paying the rent and in some places it is even less. You have worked hard, both you and your partner/spouse, to save for the deposit, which always seemed so close yet so far with the ever-increasing house prices and ridiculous bidding wars at auctions. The ancient but wise Greeks knew of the punishment of Tantalus but he had been a bad boy and it is not fair that first-home buyers have to endure a similar treatment.
Currently, you will have to save up about $100,000 and on average for 238 weeks to open the door to have a peek inside let alone a foot in the door. But you did it! Well done. Quickly buy a house before it is out of reach again.
How many sacrifices did you make? How many coffees, avocados smashed onto toast, and romantic dinners did you forego – yes, date nights are important even when no longer dating – and how many take-away meals on the couch watching Netflix did you have because you were to buggered cooking a decent healthy meal or to socialise with friends?
You know it has to be done. You know how it is has to be done. There are plenty of really really good and helpful articles in the media with useful tips on how to save for a deposit and pay off your mortgage faster (usually by the same authors AKA opinion leaders but usually not in the same article). If you think it is too hard then there are the articles to put you to shame and give you an instant guilt complex. These are about snotty twenty-something average Kiwis who have bought their first home. If these Wunderkinds can do it, so can you, you wimp. If that does not do the trick, think of the theme song of Bob the Builder (I told you that your children would influence your decisions) and once it is in your head you are effectively brainwashed.
To give you a helping hand, Government allows you to dip into your retirement savings to buy your first home, knowing full well that your first home can make a huge difference to your financial comfort in later life. This is how the system has been designed (no, not actually KiwiSaver). More than 40,000 have taken this option last year, which just shows how keen people like you are to get on that first rung and how keen politicians are not to upset the apple cart. The competition from asset-rich existing homeowners and investors is more brutal than Mortal Kombat.
If you find saving (too) hard, you have to come up with a more cunning financial plan. This may involve buying Lotto tickets, betting at the TAB, or starting your own church to fill your pockets – black leather biker jacket, hair gel, and shades are optional to avoid too much glare from above. One word of advice (disclaimer: I am not a financial advisor): do not use/buy a car if you can reasonably avoid it – it will save you thousands and it is better for the Planet.
I can only assume that FOMO played only a major role in your decision to jump on the property ladder. This is entirely natural and understandable and thus quasi-rational. After all, you were already well and truly captivated by the rat race. The media have been fuelling FOMO, of course. At the same time, the media love publishing horror stories of psychopathic landlords and meth-smoking or meth-cooking sociopathic renters. The latter almost led to a whole new industry of meth testing. Of course, you do not smoke meth, only others do and drug testing is big here in NZ.
Despite the many romcoms on widescreen TV, the call of nature had to be put on hold for a few years, on average 238 weeks, to be more precise. No worries, IVF can make up for it later. This could be another story entitled So, you want to have your first IVF baby? However, the tortuous path leading to IVF is no fun and IVF is no picnic in the park. Besides being emotionally draining it can also be a drain on your bank account.
Once you have your dream home and children you may find that half an income, usually from the male AKA bread-earner as opposed to the bread-maker, can make it a lot harder to make ends meet. Mind you, you can always work more hours, go for promotion, and work yourself to your first burnout and possibly an early grave. Not to mention that financial strain can take its toll on the relationship, including those precious ones with your children. But it is worth it and don’t take just my word for it, follow the example of all the many others. Aotearoa-New Zealand needs more babies, lots more, so go forth and multiply, after you have bought your first home, of course – first things first, as Maslow said.
All that money that you did not spend and saved up was not doing much, i.e. it was not productive, was it? Did you have it in a savings account? Based on new residential mortgage lending statistics, well over $1 billion was sitting in banks as deposits in 2020 and at least $250 million was of first-home buyers. Imagine if some or all of that money had been spent in the economy, e.g. on coffees, or going to the movies, or on new clothes, or on dinners for two or with friends, or on a hobby or sport or on learning/creating something for the sake of it and just for the joy it sparks and the reward of achievement and accomplishment in its own right. It would have been a welcome boost for local retailers and hospitality. Instead, millions of dollars were safely stacked away under the matrass, so to speak, and taken out of the economy. And you were just working your ass off that would make a Calvinist feel inferior.
At the end of the day, it is your choice and decision about your life. It is pretty exciting (or nerve wrecking) to buy your first home together or by yourself. You know why you (want to) do it and whether the sacrifices are worth it. Once you are on the ladder, it gets a little easier, financially speaking, because you do not need to work so hard to scrape together another deposit. In fact, your first home will do this for you while you are asleep or lying awake in your bed at night. In fact, your home is likely to earn more than you do in your job and it does this 24/7, 365 days a year. Money does not grow on trees, it grows on houses. It is pure magic!