First-home buyers off the market
Christchurch first-home buyers may soon need deposits of about $50,000 to get on the property ladder – and that is only if they manage to snap up one of the few low-end homes on the market.
The Reserve Bank plans to announce controversial restrictions on home loans that will dramatically reduce the number of high loan-to-value (LVR) bank loans, making it much harder to get a mortgage with a deposit of less than 20 per cent.
Economists say first-home buyers will be the hardest hit by the changes, and that supply is the bigger issue.
Mortgage brokers expect a repeat of past years when young buyers needed second mortgages and money from parents to get into the housing market.
Hopeful Christchurch first-home buyers spoken to yesterday feared the changes would leave them trapped in the rental market.
Under the Reserve Bank's plans, a $230,000 to $250,000 two-bedroom home in Addington or Linwood would require a deposit of $46,000 to $50,000.
A Press search of properties for sale on Trade Me found just 60 houses advertised for under $200,000, and 114 under $250,000.
Public servant Kate Souter, 27, earns $48,000 a year and has saved almost $10,000 for her first-home deposit.
With the proposed changes, that will no longer be enough for the banks.
It was "crushing" to be paying $350 a week in rent – more than her mortgage repayments would be.
"I consider my salary pretty decent, but for somebody not on that, what are you going to do – flat until you're 90?" she said.
Her parents had offered to be her guarantor, but Souter did not want them to risk it.
Mother-of-four Bonnie Lintott, 33, was in tears when she read of the proposed changes.
She and working partner Ryan, 37, had a savings plan to have a $15,000 deposit for a home for their family. They now pay $340 a week in rent.
If the changes proceed, owning a house would be "out of our league".
"We had a clear line on where we were going, to get ourselves grounded somewhere,'' Lintott said.
"We were hoping the next home we would move into would be our own."
Christchurch economist Robin Clements said first-home buyers were "clearly the ones it will have an adverse effect on".
"The banks will pick the eyes out of the best prospects - those with a good track record, job stability and income-earning potential," he said.
University of Canterbury economics senior lecturer Eric Crampton said the proposal was not "abnormal" compared with other countries.
Low-end housing, which most first-home buyer sought, were in low supply in Christchurch.
Schemes to subsidise first-home buyers were ill-advised.
Crampton said making housing affordable for first-home buyers required addressing housing supply.
Ray White Metro sales manager and shareholder Vanessa Golightly said first-home buyers usually hunted in the $180,000 to $350,000 bracket.
If people were struggling to get on the property ladder, she advised them to start low with units or townhouses, co-buy with friends or try to get help from family to raise the deposit.
Mortgage broker Jeremy Meachem said few people had deposits of more than 10 per cent, and 5 per cent was common.
"The biggest problem at the moment is finding something they can afford," he said.