Oh dear. The Generation Wars have started up again. A few weeks ago we read about Gary Lin and his opinion that young would-be property purchasers should stop moaning, join the army and knuckle down.
Then a chorus of opposing voices jumped in, explaining why Gary was wrong. This futile argy-bargy only proves that first-time buyers have become a political punching bag.
It’s time to put away the boxing gloves. The newspapers, TV stations and social media sites are only interested in controversy. If you’re a 20-something looking to get on the property ladder – or if you’re the parent of one – it’s not helpful. Here’s what you should do instead.
First of all, ignore the media. They use property stories as sensationalist click-bait. They are not particularly interested in giving you insights on the best route to home ownership in today’s climate.
Secondly, focus on your own goals. If your vision includes property ownership, there are some smart steps you can take.
I advise first-time buyers to break down their goal into achievable chunks. Let’s say you want to live on the North Shore. Don’t set your sights on Takapuna as your first goal. Look at the other Shore suburbs that might be within your reach. What about Glenfield or Birkdale?
Then look at the kind of property that’s right for you. Are you someone who loves wielding a drill and paintbrush? Look for a do-up. If you’re not that handy, don’t despair. Your route to home ownership may involve a unit or flat.
Could you go halves with a sibling, another relative or a BFF? Consider it. You already know each other well, which reduces the risk of a wealth-endangering personality clash.
Next, you’ll probably need a 20% deposit. The key to this is the same as it’s always been: focus. You have a KiwiSaver account (of course), so that will help. But don’t stop there – set up a separate savings account. Calculate how much you will need for a deposit, and then pay a fixed sum into savings each month. Set up an Automatic Payment from your bank.
My advice is to direct these savings into a different bank from your usual one, to give yourself more options. When funding is tight banks prefer to look after existing customers, so be one of those.
Saving that 20% deposit may take seven to ten years. That is exactly how long it took when I started saving for my first property. I hate to use the phrase “back in my day”, but back in my day, that’s how it worked. The good news is that it still works.
Last but not least – let’s all encourage first time buyers!
Every generation has faced challenges, so let’s lay off the millennials. If you’re the parent of a 20-something, perhaps you could add $10 on top of every $50 they save. I have some more suggestions for parents who want to help their offspring into property ownership, which I will share with you next month.
Want to help your kids get on the property ladder, or get onto it yourself? Get in touch.