The Truth Behind Saving For Your First Kiwi Home

As a Kiwi, owning your own home has always been an important part of growing up in a country where the terms home and own go together like fish and chips.

‘Living the Kiwi dream’ is a common phrase used when acquiring your first home, and TV shows like ‘The Block’ and ‘Our First Home’ are increasing in popularity yearly, but, as the general excitement for home ownership increases, the prospect of actually owning your first home seems to dwindle. And there have been plenty of  facts and figures driving home this point, with what feels like every second New Zealand Herald piece on this very topic.

Young Aucklanders save, with little hope (Saturday, 19 March 2016)

Young house-hunters’ property market fears (Monday Mar 21, 2016)

 

How do most Kiwis save for our first home?

Well, most of us contribute the bare minimum to Kiwisaver and you guessed it … the rest goes straight into the bank or into a term deposit, to earn measly interest rates – which, at the time of writing are at the lowest levels seen in decades.

As it turns out, many Kiwis are not using Kiwisaver in the way it was intended either. A recent article prepared by KPMG highlighted that 70% of us don’t move our KiwiSaver money from the default conservative fund. Which means, even in Kiwisaver, most savings are also earning low interest rates.

KPMG suggest that this is due to ‘financial illiteracy’. I think a better explanation is that there is a huge population of Kiwisavers who just don’t care about retirement…..YET because they are saving for a house. This means it doesn’t make sense to tie this money up in  higher risk Kiwisaver categories designed for retirement saving.

Then there’s the stock market. We know that investing in the stock market is sometimes a better way to grow our money while saving for our first home, but it’s complicated, you need a lot of financial knowhow, and again the related risks are better matched to long term savings.

So, while we’re saving for a house, most of us are stuck with earning low interest rates that just can’t keep up with house price inflation. While those lucky enough to own their own homes are being rewarded with dramatic increases in their house prices, the rest of us are watching our savings slowly but inevitably go backwards.

Here’s what I mean. This shows the difference between the average increase in traditional savings over the last 20 years – versus the increase in Auckland house prices.

Savings Graph

The graph says it all. Our hard earned savings are not keeping in step with housing market growth … and we’re being left behind.

 

So what IS the best way to save for your first home?

Bank interest rates aren’t delivering great returns and other investments can be rewarding, but require a lot of knowhow and are risky. So what are home savers supposed to do?

Well, as a country, we’re in luck. A team of us been working hard on this problem and we’ve created a brand new savings alternative for first home buyers.

It’s called The Ownery and it’s a new way to save for a home by saving directly in the housing market– not in a bank – but in houses. Which means that, instead of watching your home savings go backwards, they’ll move in step with the market. Like this:

savings graph 2

And it’s not limited to first home buyers. We know it’s hard for parents to watch your kids grow up wondering ‘how are we ever going to afford our own home?’ The Ownery can also help you save towards helping your children own a home in the future too. And it means their savings will move with the housing market, instead of at the snail’s pace of bank interest rates.

Nearly two years in the development, The Ownery is here to lower the property ladder and change the way Kiwis step into home ownership.

Click here to find out more about becoming part of a new generation of homeowners.

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