In this article we will be discussing some of the common property myths we want busted.
MYTH: I’ll just save up for a 20% deposit.
It’s okay, but how? Since houses are an asset class (meaning they must gain value over time), the magic number of 20% deposit simply doesn’t exist because it’s a constantly moving target. There are so many ways to avoid the 20% deposit and so many clever tricks that people don’t want you to know, so it’s best to consult a mortgage or financial advisor.
You can buy a house with a few options of grants (current as of 11 Aug 2022):
PROPERTY MYTH: I need to be on a bigger income to buy my first home.
You do not! It’s about affordability (ie how much you can afford the loan and also cover your needs like food, energy, etc.). It might mean that you don’t start with your dream home and get creative with where and what to buy, but being open-minded and not pretentious about what it allows you to buy is living in our rental for others.
PROPERTY MYTH: I won’t have enough money to buy a property before I go overseas.
A lot of Kiwis leave to do their big OE in London, Australia, or basically anywhere in the world, and many don’t realize what they can do with the money they have! Having an investment property label to back you up can be a real asset if you move abroad, and there are ways around this to ensure you don’t bleed your old travel money.
PROPERTY MYTH: The property market will crash, so I’ll wait until then to buy a home.
Lots of people ask about this, and we find that prices have gone down or even stayed the same. We also often hear: “I’m going to time the market.” We totally get it, headlines can be misleading and steer you in a certain direction, but we challenge you: What are you judging for and how are you going to judge?
When we hear people say, “Oh yeah, now is the time to buy.” The excitement is back in the market and everyone and their dog are here wanting to buy. If we look at the COVID example, many people were concerned that the housing market would crash and instead it skyrocketed with a 30% increase in two years, which is naturally unsustainable.
One of our blogs talked about the collapse of the real estate market, and in simple terms, a market decline or correction is a 5% decline. But a 5% drop after two years of 30% growth… It’s still 25%!
PROPERTY MYTH: I was reading a headline from [insert media outlet] that said “Don’t buy a home”.
ALTERNATIVE PROPERTY MYTH: I was listening to [family/friend not in finance] saying “Don’t buy a home”.
One of my favorite phrases is “Oh I read this…” or “Oh I heard this…” and it often puts people off their backs. It’s natural to have confirmation bias or trust those around you to make informed decisions because they have your best interests at heart! But we realize that most people don’t work in the nitty-gritty, day-to-day of the economy, and even if they’re on Reddit, and YouTube, and getting the news, they may not be working in the industry and getting the same. they find you. concepts such as financial advisors or mortgage brokers.
PROPERTY MYTH: I can’t afford mortgage repayment because these interest rates are high.
You’d be surprised what you can do to structure a loan/mortgage so it’s affordable. Remember, rents can be expensive, too, and it’s much more satisfying to pay your “rent” to the bank from your own home, rather than to a landlord. Unless you really go through the numbers, you really won’t know.
For example, after crunching some numbers, Neve Jervis’s financial advisor found a situation like this: Rent was about $780 per week, while the mortgage payment was $820 per week. While we know that some people can live paycheck to paycheck, on a very tight budget, an extra $40 a week can be made for many people.
We know that when people listen when people talk about things like this, they lose money or they miss the market entirely. Or, they only read the headline and not the entire article.