A leading New Zealand financial commentator says getting onto the property ladder is achievable but requires a different approach to the previous generation’s.
The property market has exploded this year as interest rates have plummeted and expats flock home to roost.
In addition, the return of (LVR) loan-to-value ratios could make owning your first home more of a challenge.
However, Frances Cook tells TVNZ1's Seven Sharp her best advice is not to panic about pricey house deposits and to look at other options of multiplying cash.
“It is possible if you stop thinking about it the way that your parents did and you stop hoping to save cash and go straight into a house. You’re going to need to start thinking about things like shares. They can get you there,” Cook says.
She says shares are great in the sense that they “grow a lot more”.
“In a savings account you’re going to get one per cent or so a year. Shares are going to give you seven per cent a year, so that’s actually more than housing, so you could even catch up.”
But, she says, it’s an average number, given the share market is subject to ups and downs, especially in a year like 2020 when investments like KiwiSaver plummeted.
“You do earn more in shares over time,” Cook says, adding that it takes about five years to build financial independence and ride out those bumps.
“You will come out ahead, but make sure you give yourself time,” Cook says.
She advises Kiwis to be savvy about money rules.
“You can’t get into housing these days by the simple ways that people used to 10 or 20 years ago.
“Nowadays, you’re going to have to know a little bit more about money."
Cook says people don’t need to be investment experts but need to follow a few simple ground rules and sign up to some of the online platforms.
“You’ve just got to take the time to figure it out, read a couple of books and you will get there,” she says.
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