Thinking Outside the Box To Get on the Property Ladder

Bramwell Bate’s new solicitor, Lois McLintock, provides an overview of the current market and options for purchasing your first home.

New Zealand has seen an escalation in housing prices in recent years and, unfortunately, this has kept many Kiwis from getting on the property ladder and fulfilling the dream of home ownership.  However, the QV House Price Index recently reported that average house prices had decreased and in Hastings that meant a decrease of 3.3% and in Napier a considerable 7.2%.

A key barrier to owning your own home is saving for a deposit. Getting together a 20% deposit has become out of reach for many Kiwis. Even with changes to the market the average house price in the Bay sits at around $850,000. Without help from the ‘Bank of Mum and Dad’ or friends and family, raising a deposit has become a challenge for many of us.

In the past, most homeowners have chosen to purchase property with a spouse or partner and it may have seemed unusual to purchase a property with a friend, family member, parent, or another couple.  However, the housing crisis and inflationary pressures have forced many New Zealanders to get creative about purchasing property to get in on the benefits of home ownership. Even couples are struggling to get a deposit saved and doing it by yourself is often out of reach of many. Shared ownership structures are taking off in the housing market as we look at purchasing property in more unconventional ways.

Collaborating with your best mate to raise a deposit has become an increasingly popular way to get out of your shared flat and stop putting rent money into someone else’s pocket. A range of banks are getting on board with these shared ownership structures as banks work hard to adapt to the changing housing market and the cost of living. A benefit of owning property under these shared ownership structures is that everyday expenses such as rates, insurance, and home maintenance can be shared. This also makes getting a home loan more achievable and paying a home loan easier.

Where does your lawyer fit in? A lot of people we speak to are concerned that if they purchase a home with a friend or another couple, they might be ‘stuck’ with them. They might think that they will not be able to get out of the joint ownership should their circumstances change or won’t be able to leave their share in the property to their kids. It is important that potential buyers know that there are solutions to these concerns.  We are seeing a ‘tenants in common’ ownership model being utilised much more. This means multiple people can own a property and have defined shares in it which they can deal with separately from the other owners. For example, their share in the property can be passed on to someone when they die through their Will. We recommend this as the best way to own a house when purchasing using a joint ownership structure.  These legal concepts can sound a bit confusing, but your lawyer will be happy to help you work through the best option for you and your situation.

If you are looking into purchasing a property under a joint ownership structure, it is important that you also have a ‘Property Sharing Agreement’ drafted by your lawyer. This agreement sets out you and your co-owner’s rights and obligations in relation to the property and details things like who will pay for rates, insurance and upkeep of the house. It might also cover how the mortgage repayments are to be made and by who, and deal with who can occupy the house and at what time.  In addition, a property sharing agreement includes the process should someone wants to sell their share in the property, or if there is a dispute.  Having one of these agreements is important to ensure that your purchase and ownership process goes smoothly and that you are on the same page with your co-owner.

We are passionate about helping first home buyers achieve their dream of home ownership. We understand that purchasing a first home can be daunting and members of our own team have recently been through the process so can relate to what you’re going through. We want to help you understand alternative pathways to getting on the property ladder and achieve your dream of home ownership.