Median price for residential properties jumped by 32.3%
Skyrocketing property prices across New Zealand are leaving first-home buyers (FHBs) with little choice but to seek financial help from their parents to enter the property market, according to the latest figures.
In Australia, figures revealed that 60% of FHBs received financial help from their parents to climb the property ladder, up from 3.3% in 2010. Parents in Australia are also contributing a record-high $89,000 into their children’s deposits, according to analysts at Digital Finance Analytics.
While New Zealand does not have official statistics, Mortgage Lab estimated 60% to 70% of FHBs are receiving parental help.
Loan Market mortgage adviser Bruce Patten shared that a member of his team specialising in helping FHBs claimed that every customer he had worked with virtually this year received some form of financial help from their parents, as reported by NZ Herald.
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The median price for residential properties in New Zealand jumped by 32.3% – from $620,000 in May 2020 to $820,000 in May 2021, according to the Real Estate Institute of New Zealand (REINZ).
In Auckland, prices rose by 27% from $905,000 in May 2020 to a record high of $1.148 million this year – with experts estimating that Auckland buyers need up to a $170,000 income to buy a property.
Mortgage Lab chief executive Rupert Gough stated that a few parents in New Zealand contributed significantly to their children’s first home, such as by buying properties together with their children and listing their names on the title, according to NZ Herald.
However, Gough noted that Kiwi parents were more likely to gift or lend smaller sums towards deposits – which could be at least a few thousand dollars.
Tom Hartmann, a resident blogger at financial advice website Sorted, said a “huge intergenerational wealth transfer” was now underway – with many parents helping their children to purchase a new home early rather than gifting cash or property as part of their inheritance.
However, he warned that supporting children into homeownership early might fail to document the process properly.
“It is really key to take professional advice, to run the numbers and to understand how it is affecting your own retirement planning because these decisions can affect decades of life,” Hartmann said, as reported by NZ Herald.
Hartmann also revealed that a few parents sell their family home and move out of the city to save more money for their children, most likely leading to social isolation or retirees underestimating the costs of moving to smaller areas.
