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How to buy your first house: a deep data dive into those miracle property stories

What can we learn from the spate of reports about young people bucking the odds and purchasing property? Chris McDowall reads them all and crunches the numbers.

Over the last few months I’ve taken to hate-reading the NZ Herald and Stuff articles about plucky young kiwis buying their first home. Last week, while reading Russell Brown’s excellent Behind those Herald home-buying stories, my bemusement devolved into fury. Brown unpicks a mid-April story titled From $30k deposit to $1m planned portfolio in a year: one couple’s story.

So, yes, the couple didn’t buy a $640,000 unit off the back of $30,000 in savings. Their deposit wasn’t $30,000 as the headline and intro claim – it was $256,000. I think most twentysomethings with jobs could get a bank to lend on that basis. But of course, most twentysomethings don’t have parents in a position to pitch in a quarter of a million dollars.

This got me wondering how representative such stories are. Over Easter I tracked down every first time home-buyer Herald and Stuff article published during 2017 and summarised them in this spreadsheet.

I ignored a handful of articles lacking details I considered crucial, such as price or year of purchase.

We end up with 19 stories about first-time homeowners.

The numbers in each house represent purchase price in $1,000s. The number of people indicates the number of buyers.

Already a few things are evident. Six stories are about people buying houses by themselves, all at the lower end of the price range. Fourteen articles involve houses purchased for $500,000 or less. Perhaps things aren’t so bleak?

Articles divided by geography

Let’s split the stories up geographically. Blue houses represent Auckland properties, green houses are from elsewhere in New Zealand.

 

Seven stories focus on purchases made outside Auckland in localities such as Awapuni, Paraparaumu and Middlemarch. All involve houses purchased for $435,000 or less. Nearly half of these homes were purchased by a single person.

Auckland presents a different picture. The prices range from $190,000 to “around the $1.4 million mark, of which their offer came in under”. This market is heavily weighted towards couples and groups, with the two known prices for single folk occupying the cheapest spots.

Let’s dig deeper.

Living with parents and gifts towards deposit

 

Many articles mention buyers living at home with parents, either for free or at a reduced rental rate. Such arrangements are represented by a shaded roof. There were several other cases where I suspected that the subjects were living rent-free ahead of purchase, but I did not include them if it was not explicitly stated.

Other buyers received a financial windfall that helped purchase the house. These are worth covering in detail.

  • $15,000 from parents towards a $265,000 apartment in 2013
  • $200,000 from parents towards a $475,000 house in 2009
  • $256,000 from parents towards a $640,000 house in 2017
  • $100,000 from an inheritance. The buyer can’t touch that money for seven years, but it helped convince the bank that she was a safe bet for the $750,000 house in 2016.
  • The $500,000 house was purchased for a pair of siblings by their parents in 2013. The boys, along one of their partners, later took on the mortgage.

Flatmates and Airbnb

 

Another common thread was taking on flatmates or renting out their entire home, symbolised with locks in the graphic above. Most  of these arrangements were quite conventional, but a few took elaborate forms. One couple move out of their Westmere home every six months to stay at a parents’ vacant home.

“To improve their financial position, the couple moved out of their new abode and rented it fully furnished while they spent another six month stint in St Heliers. They moved back to Westmere over the summer, and now that her parents are off again in May, once more the Horans will up and go.”

Another person interviewed “rents out her Hamilton house on Airbnb while she house-sits for free in Auckland.

Only three Auckland houses bought after 2013

Here’s the kicker. The average Auckland Area residential house value has increased from $700,000 to $1.05 million between March 2014 and March 2017. That’s an increase of 49.5% from an already historically high base.

Of the 19 stories published since January, just three were about young(ish) people managing to buy a house in Auckland houses after 2013.

 

Each of these cases involve exceptional circumstances.

The national supply chain manager for Fletcher Building and the global brand manager for Matua Wines living rent-free for two years before purchasing a home in 2015, which they in turn rent out every six months.

A 23 year old and her partner who secured bank approval in 2016 due to a large inheritance which unlocks when she turns 30.

A newly married couple who borrowed 60 per cent of the purchase price and “the rest of it came from parents as an equity gift” in 2017.

The other Auckland stories describe purchases from as far back as 2009, when a 21 year old bought a Manurewa property for $190,000. The majority come from 2012 and 2013 when the market was hot, but still within the bounds of sanity. Yet these stories are presented with equal weighting, peppered with inspirational quotes like:

Goals are always achievable if you can sit down and plan and have the heart and drive to back yourself.

“Any house is a good house to live in if it works for you.”

But these people shouldn’t be teased for their comments or their property purchases. The problem lies in a set of misleading narratives promoted in the media. Working hard, saving heaps and being clever with your money just won’t cut it in today’s property market. The real story is this: Young people buying a home either need to move out of Auckland, get some cash from their folks, shack up with someone who can, or build a time machine.

See the data behind this story here.


More on millennials buying a first home in Auckland:

Ching! Ching! The great Spinoff millennial house-hunter grant just super-jackpotted to $100,000

The Spinoff guide to becoming a young homeowner

 

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