As a 20 or 30 something, you would be forgiven for feeling like you’re stuck between a rock and a hard place; rent takes
a significant portion of income every week, making it impossible to save for a deposit for your own place that gets
larger and larger every year. It’s not the smashed avocado’s and latte’s, nor is it a lack of desire. The articles in
the Herald and Stuff about the 23 year old buying her third property are an extra kick in the guts until you read later
down the article, she ‘received a leg up from her parents’.
Real estate agencies seem to be selling a record number of properties each month, implying there are more and more
properties being sold, however, none accessible to you. The affordable and aspirational end of the property market are
drastically undersupplied, meaning first home buyers are competing with buyers that have already built up significant
equity and cash reserves over time, for property that as a whole, is of an overall poor standard.
You’d also be forgiven for feeling down after finally scraping your deposit together, finding the perfect place for your
first home, getting preapproval from the bank then going to an auction where the opening bid is higher than your
absolute maximum price (for the 4th of 5th time). You consider if the city you’re in is the one for you.
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The above was the reality for myself, and still is for most of my peers - I’m 23 years old and purchased my first
property at the end of last year. The way I purchased mine was different to the traditional model described above that
worked for my parents, however demonstrably won’t work for my peers. Income to house price ratios were sitting at 4x-5x
40 years ago, with Auckland now nearing closer to 10x.
I work for Du Val Group, NZ’s largest suburban apartment developer in their Capital Partners division, so my job is to
find the money to finance and build over 500 properties at a time. Prior to this I worked for Westpac Bank in the head
office in Credit Risk and Lending; I started on the phone helping people with loans and credit card applications,
working my way up to assess the bank’s risk tolerance for lending on residential property. I am very fortunate in my
working career to have had a look ‘behind the scenes’ of finance and property in New Zealand and have picked up some
valuable insights along the way.
My first insight is that price is not the problem. Being of the millennial generation (just), I don’t make friends
saying this. Price is a symptom of market conditions, and at the moment, the market is undersupplied, especially in the
aspirational end where first home buyers shop. This is economics 101, price will increase if demand increases at a
greater level than supply, until an equilibrium is reached. Most of the tinkering with LVR’s, taxes and other fiscal and
monetary brakes to stymie price creep have drastic unintended consequences that can make it even more difficult for my
generation to get on the ladder. I have written a further article on this here.
The next insight is a prevailing lack of knowledge. The scenario painted above is the standard model, especially as real
estate agents are incentivised to let properties run at auction, knowing there is upwards price pressure based on
constrained supply. I bought my property Off the Plans from Du Val along with my partner and another friend in October
last year. ‘Off-the-Plans’ purchasing has been around for a while, however isn’t given much media attention nor strong
market attention. I chose to purchase off the plans for a few reasons, mostly around bringing certainty to my property
journey.
Buying off the plans meant that we purchased a brand new, 2 bedroom, fully furnished (beds, TV, whiteware etc.) freehold
apartment in the heart of Mount Wellington for $650,000. This apartment won’t be built ready for me to move in until
mid-2022. During that time, I expect the value of the property to have gone up through natural appreciation. As this was
our first home, we were eligible to receive the home start grant from the government agency, Kainga Ora, where for a new
build we received $20,000 unencumbered towards our deposit - this again is not widely known. We were required to pay a
10% deposit to secure the property off Du Val which meant that after the $20,000 grant, we now needed to come up with
$45,000 or $15,000 each. Suddenly the deposit required had shrunk from a big daunting $130,000 to a tangible $15,000.
This $15,000 included our kiwisavers, so after each accessing the funds available there, we each only needed to put a
further few thousand dollars towards our deposit and, Bam! just like that we had a property.
We had brought certainty to our journey by knowing what we bought and what it cost us, and we now had a goal to work
towards, each further dollar we save could go into the equity of the property when it comes time to settle in 2022. We
had completely circumvented the traditional model, we got to choose the unit that suited us best, didn’t have to deal
with a real estate agent and best of all, didn’t have to watch our dreams slip through our fingers in an auction room.
Our property will be warm, dry and brand new. It is in a good location and is perfect for us as younger working
professionals, with little to no maintenance required. I also know that by buying a new property, I am supporting a
developer bring more stock to market, which will ultimately mean we can sooner redevelop old, leaky, cold housing stock.
While this is not necessarily our dream home, that doesn’t matter, it’s our first home and we can at least make a start
with something that is a huge improvement on an older, colder, leakier home.
Had I not had the work experience both at Westpac and at Du Val, I simply wouldn’t have known this path existed. This is
not taught at school and with media focused on sensationalism and stories about how hard it is and how bad our lot have
it - which is certainly true in part - it is very hard to find stories such as mine that show an alternative to the
norm. I have written this article in the hope that I may shed some light on the benefit of buying off the plans for
first home buyers in particular.
For those looking to buy off the plans there are a few things to look for in the developer, most importantly, the track
record. I chose to buy off Du Val after only working for the company for 2 months, so I lacked the benefit of
experience. Du Val had delivered over 1,000 units when l bought and has plans for another 1000 rolling each year. It
hadn’t all been smooth sailing, with one project delayed fairly significantly, however because they had 5 other projects
rolling through at the same time, this wasn’t an issue - the scale of the business gave me the confidence to make my
personal investment with them.
There are a number of developers across the country who offer the option to buy off the plans and if you find the right
person to work with and the right company to buy from, it can be a massive help on your house hunting journey.