How Do You Know When To Give Up On Buying A Home?

Monday, 3 March 2025, 9:30 pm
Article: RNZ

Susan Edmunds, Money Correspondent

Homeownership remains a key goal for many New Zealanders - but how do you know if it's right for you?

The proportion of people who owned their own home increased in the latest census, but many are buying later in life than their parents' generation. Particularly for those with children, it is prompting some to ask whether it is still worth pursuing.

One would-be buyer who said they were "starting from the bottom" in their early 30s with no savings, no KiwiSaver and four kids, asked whether they should accept they could be lifelong renters.

They said they might end up "wasting their children's childhood" if they committed to saving every spare dollar they had, knowing they could still be decades away from owning a home.

Financial coach Liz Koh of Enrich Retirement said it was a "huge dilemma" for many people.

"There is no right or wrong answer to the question of whether to buy a house or not. It is simply a matter of weighing up the consequences of the choice you make and then deciding what fits your goals, values and lifestyle.

"To some extent it is about what you are prepared to forego in the short and medium term in order to have a better outcome in the long-term. That's a personal choice. Some people are not prepared to make the kind of sacrifice that is required to save hard."

She said people also needed to understand the range of options that could be available.

"It pays to do your research before deciding. For example, it may be possible for a young couple to purchase an affordable rental property - perhaps even in a different town - while still renting themselves. This would enable them to have some exposure to property."

Buying an investment property usually meant finding a 30 percent deposit, but that still could be a smaller hurdle if the purchase price was much lower.

"There are also a number of options emerging for affordable rental properties that include financing options for tenants to eventually buy the properties they rent," Koh said.

"So I would caution people before deciding that property is unaffordable to look at what is available before making a decision."

Kelvin Davidson, chief economist at property research firm Corelogic, said there might come a time in people's lives when the cost of buying and owning a house could outweigh any possible financial gain from paying down debt and possibly getting some capital gain - "but it'd be much later than 30s, in my view".

Dean Anderson, founder of Kernel Wealth, said he grew up with a single mother who chose to work part-time to be able to be around outside school hours.

"That comes at a financial cost, something that every parent will battle to balance. Today, it is even harder - life costs more and social expectations are high. TikTok and Instagram is constantly bombarding us with completely unrealistic social standards, lifestyle needs, consumer goods. It can be hard to push back against that, but really the best way to help your kids have good lives now, and into the future, is showing them the value of things that don't actually cost money.

"Not everyone aspires to home ownership, and for some families renting is the trade-off they want to make to prioritise things that are more important to them.

"No matter which pathway is for you, financial education is such a powerful gift to give your kids. Showing them how to value a dollar, to spend within their means, to not be tempted by unnecessary consumer goods - these are so valuable. Put aside a few dollars a week, invest it, and show them over time how they can set up their own futures.

"The reality is, choices in life require money - starting that conversation now is key."

Gareth Kiernan, chief forecaster at Infometrics, said there would be no single right answer.

"Like most things in life I'd suggest there is a balance somewhere, and each individual or family will need to find what is right for them."

He said saving above all else would probably be unsustainable over a long period.

"On the other hand, if you don't have a financial target and some strategy about how to get there, it could be easy to be relatively undisciplined with your spending and end up in a less secure financial position than you could or should be.

"At the risk of offering overly simplistic budgeting advice, work out your expenses, include an amount for activities, holidays and entertainment, and an allowance for unexpected one-offs… That way, you don't run the risk of never hitting your savings target because there's something you haven't allowed for, and you've given yourself permission to have fun doing stuff with your kids, so you're controlling your money, rather than being a slave to it. Review things every so often to make sure that it's still fit for purpose."

Renting in retirement

But if you decide not to buy a house, how can you ensure you don't leave yourself exposed when you retire? The Retirement Commission says by 2048, 40 percent of retirees will be renters - 600,000 people.

But its analysis showed that people who were renting were much more likely to be spending 40 percent or more of their pension on housing.

Anderson said if people were not disciplined with saving and investing, increasing their KiwiSaver contributions could help.

"This 'pay yourself first' approach means you are automatically putting a bit extra aside for future you, before your net pay even hits your bank account. Behind the scenes, it will keep compounding and over time you will be amazed at what it will grow to.

"That way when retirement hits, you can have a nest egg to help with the next adventures in life and aren't relying on a house to fund it."

Davidson said there was a bigger issue about personal choice: "Buying isn't for everybody and renting doesn't have to be an inferior financial outcome - look at Germany or Switzerland where most people rent. You just have to save the difference and try to build wealth that way".

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