Auckland and Christchurch mortgage lenders have seen a rise in the number of parents approaching and asking how they can help their children purchase their first home. As house prices in these metropolitan areas continue to rise, first home buyers are finding in increasingly hard to take that first step and are seeking out other ways of getting a foothold in the property market.
Do Parents Need to Become Guarantors?
Since the Reserve Bank introduced tougher loan-to-value ratios, first home buyers in particular have found saving for a minimum 20% deposit challenging and in some case impossible. KiwiSaver helps on average about 60% of first home buyers make up their deposit, with $23.3 million being withdrawn in the year up to June. But as the maximum withdrawal is $5000 once you have been a member for 3 years, many buyers are left with a significant shortfall which is where Mum and Dad come in.
With the latest average house price sale in Auckland having risen 2.7% over the past 3 months according to QV, home sellers are confident in achieving the asking price they want. Consequently they are asking and getting higher prices for their homes, leading to the average asking price in Auckland rising to $732,240 in June, up from $685,426 in April.
Parents are then seeking out mortgage lenders either off their own back or with persuasion of their children to find out how they can use their home equity to help make up the balance of the new house deposit. Lenders are suggesting that both parents and children look carefully at the pros and cons, their own current and possible future family circumstances and seek independent professional advice before signing any contracts.
However for Auckland first home buyers who do not have the option of parental guarantors, the news is not all bad. QV has identified that the areas of Waitakere, Flat Bush and Papakura as having reduced growth in property values. Identified as having an oversupply of properties due to property developers and speculators releasing their land and/or properties for sale at similar times, the pace price rises is slowing down.
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