I remember being in my early twenties (in the 2000s) and having conversations with my Victoria Uni mates who were obsessed with property. Some were already on “the ladder” at the time, buying up old houses in the ‘burbs of Wainui, Naenae, Taita, and Stokes Valley while either living with their parents, flatting, or co-living in the house they bought. They all had the “Rich Dad Poor Dad book”. I thought they were very clever and well on their way to achieving the ‘Kiwi Dream.’

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The Kiwi Dream – Buying your first home

So, what is (or was) the Kiwi Dream back then? Well, there were a few markers of “success” that seemed to be prescribed to people our age as goals to attain in the future. They included a degree, doing an OE, getting bad tattoos, getting married, having kids, generally having a life fit for social media, and of course, buying a house. I remember thinking that buying my first home was imperative. So, with a lot of saving and the help of an awesome granny, my then-partner and I made it happen.

Fast forward twenty-something years and post-divorce, I found myself back in the position of a first home buyer (but now with three kids in tow) and finding it harder than ever to get back on the ladder.

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Buying today is harder than it was 20 years ago

Property prices have surged. (My first house in Naenae is now worth about four times as much.) Interest rates are higher in the past few years (but in 2000s when I bought, they were almost 10%). Wages have increased, but not enough to match the increasing house prices. There is also a significant housing shortage.

Getting that classic Kiwi quarter-acre is definitely harder today, but with a bit of creative thinking getting onto the property ladder is still achievable.

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Time for creative solutions!

In an ideal world (or the world of the old Kiwi Dream), I would have enough capital to buy a family house in the area I like, and my kids and I could live in it. But that is not reality for most, certainly not for mothers on a part-time income. Does that mean I am off the ladder? No. It just means I had to get creative.

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Rent-Vesting – with a friend.

As it turns out, my friend was in a similar post divorce/single income/kids situation. It occurred to us to pool our resources together to give our kids a better life than we could do alone. Firstly, we decided to rent together to save costs. That worked very well, so then we decided to buy a small investment property together to keep some of our money in the property market. We didn’t have enough to buy an owner-occupied family house either separately or together in the area where we worked, but we could afford to rent together. This is called rent-vesting - where you buy an investment property in an area you can afford (in our case, Horowhenua) and you rent close to where you work (Wellington). So far, rent-vesting has worked for us, and we may continue doing this and even buy another property in future as well. (Word to the wise - see a lawyer if you are going to commit to any major financial decisions, especially if those decisions involve another party).

Rent-vesting - where you buy an investment property in an area you can afford, and you rent close to where you work.

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One first-home-buying formula does not fit all

I have done the “buy a house, live in it and DIY renovate it” thing and I can tell you that one of the exhausting summers of my life was six weeks of sanding, re-puttying, and painting wooden windows while raising a toddler and working full-time. As I am older now, I am keener on spending the money to buy me time. Renting works for me as I have the freedom to spend my weekends not renovating or fixing my house. By rent-vesting, I can still have some money in property and also in managed funds too, so I am not missing out on capital gains and compound interest elsewhere. This also means that my entire investment strategy is not just property, as it once was.

By rent-vesting, I can still have some money in property and also in managed funds too, so I am not missing out on capital gains and compound interest elsewhere.

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‍The future of the Kiwi Dream?

My parents are in their 80s and live in a 240sqm house. While that was the Kiwi Dream for the Baby Boomer generation, I am not sure it will fit ours (Gen X, Millennials, Gen Z, etc.) going forward. My goal is to downsize to a tiny home in a rural area on leased land as part of my rent-vesting strategy. That is not exactly the “Kiwi Dream” that I grew up with!

I think the Kiwi Dream is going through a transition, and the creative housing solutions that people are coming up with are really cool.

So, if you are a first home buyer, there are ways to invest in property without physically being in it. Out of the box thinking can help you get on the ladder, and like me, you may even decide that an alternative solution/dream is actually what you prefer anyway.

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Shona.

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About Shona: Hi, I’m Shona, the communications and marketing support person for Velocity Financial. Designing effective communications in a complex industry such as Finance is a worthy challenge. Finding ways to bridge gaps between complex financial information, and the everyday needs of people trying to navigate that world through informed choices, is something that I relish. I love deciphering and disseminating the expert knowledge and ideas of our clever team, into simple messages that speak directly to our clients, who are hungry for more knowledge and better understanding. In my outside life, I am a keen photographer and, like others in the team, I have a passion for the outdoors, hiking and mountain biking. I also train in martial arts and have been known to wield a sword on occasion.

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Disclaimer: I am not a financial adviser and what I have shared is general advice that has been peer-reviewed by my team. As always, make a time with our financial advisers for expert advice about your own situation.

Always get professional advice

The information shared in this post is meant to be general guide to support you on your journey. When making important decisions about your finances, we encourage you to seek independent financial advice first, tailored to your unique situation.  As well as talking with a financial adviser, make sure you talk to your lawyer and accountant too – together they'll help you find the best solution for your specific situation. Our knowledgeable financial advisers are here to help. Check out our website for the details about our financial advisory services in our disclosures  https://www.velocityfinancial.co.nz/disclosure-statement.

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