PHOTO: Auckland. FILE
First-time homebuyers are receiving a sobering warning that they may struggle to accumulate a sufficient deposit for an average-priced home. An exclusive report shared with 1News is forecasting that the deposit required for an average Auckland house could potentially reach $1 million by 2045.
Auckland resident and designer Raph Roake finds the prospect of homeownership a distant dream and is considering alternatives such as enjoying a coffee splurge and perpetual renting. He remarked, “The current deposit requirements are a distant goal for me. If I were to pursue that path, I’ve been exploring alternative investment options, like shares or managed funds. When a group of my friends and I have attempted to consider homeownership together, it has proven to be out of reach for those of us without parental support.”
Nevertheless, the financial services platform Area encourages aspiring buyers to think outside the box and seek unconventional ways to save. Area’s founder, Derek Handley, told 1News, “The idea of saving up 20% for an average-priced house through one’s own hard work is almost mathematically impossible at this point. We’ve reached a stage where the required amount is so substantial that individuals will need to explore different saving strategies and may ultimately require assistance from a third party if they lack access to the ‘Bank of Mum and Dad.'”
Handley suggests that deposits for certain homes will need to increase significantly. For an average Auckland house priced at $1.25 million, prospective buyers would need to accumulate a $250,000 deposit. However, by the time they manage to save that amount within ten years, they would need to secure $500,000, which is a conversation not frequently addressed, particularly for first-time home savers.
These findings are based on the Aera Time-To-Deposit Index, a tool developed using data from various agencies, including Statistics New Zealand, and validated by economists from Infometrics. The surge in net migration to 110,000 has led to a persistent disparity between housing demand and supply.
To address the supply issue, Simplicity Living has introduced an investment fund aimed at housing development and offering affordable mortgages. As house prices begin to rise once again, innovative solutions may be essential to tackle this age-old problem, with an accompanying need for increased incomes and savings.