It’s a hard road to home ownership, but there are ways to get there

Monday, 4 November 2024

Two thirds of non-homeowners feel locked out of the market, and Kiwibank’s leaping on that to remind consumers of its Co-own product.

Nearly two thirds ‒ 63% ‒ of non-homeowning New Zealanders feel locked out of the housing market, a new report reveals.

And the Kiwibank report also found that while 85% of New Zealanders believe owning a home is important, 32% of non-homeowners do not think they will be able to.

House prices skyrocketed in the post-Covid market boom of 2020 to 2021, and that led to already stretched home affordability becoming even more of an issue.

Prices have subsequently fallen, with the national median price down 18.0% to $805,984 in October from the late 2021 peak, according to CoreLogic.

But it is still up 15.6% on pre-Covid prices, and CoreLogic’s chief property economist Kelvin Davidson said housing affordability remained challenging for people trying to save a deposit or service a mortgage.

Kiwibank’s Steve Jurkovich says there are innovative pathways people can take to achieve home ownership.

Now, Kiwibank’s first State of Home Ownership report shows just how big an obstacle prices are for aspiring homeowners.

Fifty-nine percent of the non-homeowners in the report said high house prices were the main barrier preventing them from buying their first home.

The rising cost of living, the struggle to save a deposit, high interest rates and low wages were also cited as factors that compound the difficulties of purchasing a first home.

Kiwibank chief executive Steve Jurkovich said the report showed owning a home, and the security and stability it brought, remained the Kiwi dream.

That desire had not changed, despite rising house prices, interest rates and living costs, but it was clear many people felt locked out of the market, he said.

“Navigating the path to homeownership can feel overwhelming, but there are innovative, alternative pathways that people can take to achieve it.”

These include rent-to-own schemes, co-ownership, community housing, and cross-leases, and the report suggested they had been demystified a bit, he said.

Three Now show follows Kiwis exploring co-ownership as a way to get on the property ladder: This time long-time friends Ben and Ciaran.

Seventy-six percent of respondents said it was necessary to think differently about home ownership options, while 48% of non-homeowners were open to exploring alternative pathways.

But awareness of the alternative options varied, the research showed. The two best known options were rent-to-own schemes (68%) and co-ownership (47%), which were also considered the most attractive options.

Jurkovich said older generations had a greater knowledge of the options available, possibly because they were more aware of the benefits of rising house prices.

“That is why it is important to amplify the message that there is a range of different ways to get on the property ladder, and that banks are open to exploring them with customers.”

Banks like Kiwibank have in fact exploited the trend to thinking laterally about home ownership, creating and marketing a product specifically thinking about buying property with family members or friends.

In 2022, it launched Co-own, a vehicle to help people team up with others to buy. It helps people set up joint borrowing arrangements, so the deposit can be combined, and property-related payments can be shared.

Jurkovich said they had seen a big rise in the amount of people wanting to buy with family members or friends.

But the bank wanted to make more people aware that co-ownership was something they could pursue, and that it was not a crazy idea, he said.

Wellington flatmates, from left to right, Michael Berg, Jono Lee and CJ Atkinson-Kos bought a house together via Co-own in 2022.

“It can still be difficult to land a property as having an arrangement in place does not necessarily mean a negotiation will be successful, but co-ownership gives people more options to get on to the property ladder.”

The report showed that for those open to co-ownership the most appealing factors included shared expenses (45%), and the ability to use it as a stepping stone (40%).

“Co-own captures the essence of what Kiwi want to do, which is to help each other get ahead,” Jurkovich said.

“But the appeal of rent-to-own schemes is quite encouraging. New Zealand has not yet scaled up in this space, and so for people thinking about such schemes awareness of them is important.”

Kiwibank’s report follows research on shared home ownership schemes released by Westpac earlier this year.

It estimated that 152,000 lower-and-middle-income Kiwi households who were renting could be eligible for affordable shared home ownership schemes, such as shared equity and leasehold arrangements.

But it also found that most people were not aware of those options and that community housing providers faced barriers to scaling up their capacity to provide more such homes.