With all the changes to lending criteria over the past years and elections throwing overseas investors' ability up in the air, saving for a house deposit seems like something people did in the 90’s!
New Year’s resolution: “OK, I'm going to start saving for my house deposit, so I won’t buy coffee for the rest of the year.” Yeah right. I guess a week later (if you’re lucky), you will be clutching your take-out coffee and telling yourself you will start tomorrow!
A survey of 2,000 Americans by Capital One found that people are willing to sacrifice to save for a house deposit. But what people are saying and doing are two completely different things.
Two-thirds of the respondents said for an extra $1,000 in savings they would give up internet for a month. 30% would give up their smartphones for six months and a 54% would give up coffee for rest of the year. Really?
Time for a reality check. Whilst we are saying these sorts of things, we aren’t doing them. The Intention-Behaviour Gap has kicked in.
The article concludes by saying, “No matter how broke people are or how desperately they may want to save, smartphones are now considered by many to be more important than their toothbrush or sex!” (hmm, I know which one I would choose…).
So, how do you make sustainable changes to increase savings for your house deposit?
Here are 5 tips that will help you.
- Be realistic and start small.
If you are a two-coffee-a-day person every day of the week, cut back to one coffee on three days. I can hear you saying that this isn’t going to make much difference in the long term. Maybe not in terms of dollars and cents, but the point of this exercise is to train your brain so that savings is a fun thing to do. So make sure you actually do save the money; don’t just absorb it into your other expenses.
- Make it easy and automate your savings.
Ask your employer to allocate a portion of your wages directly to a savings account. Then, each time you get a wage rise, increase the amount that is going to your savings account. Otherwise set up a regular payment to go out as soon as your pay hits your account.
- Focus on what you are saving for.
Rather than thinking that you are depriving yourself by saving (a negative thought), focus on the end goal of your own house to call home! (positive thought). Have positive visual reminders of what you are saving for, like pictures of the house, neighbourhood, interiors you like.
- Think more carefully before you spend.
Take a bit more time and do a bit more research. Ask yourself if you really need whatever it is that is tempting you, can you find a lower cost version on Marketplace - or do without it altogether. The difference between what you were originally intending to spend and what you actually spend can go to savings.
- Have a Plan.
Know what is coming in and what is going out and what the difference is. If there is nothing left over or there's more going out than in, you are going to have to make sacrifices to get on track. But don’t take a ‘slash and burn’ approach, it just won’t work. If you don’t know what to do next, find someone to help you.
If you feel you just can’t tighten the belt anymore and the house deposit is looking like an impossibility, there is something else…
Earn more income.
I know, easier said than done, but how about a second job, turning your hobby into something that generates some income, or maybe you could sell some of the ‘stuff’ you no longer want.
If you are feeling stuck on the road to saving for your house deposit, I know where you’re at, I have been there too.
*Lynda Moore is a Money Mentalist coach and New Zealand’s only certified New Money Story® mentor. Lynda helps you understand why you do the things you do with your money, when we all know we should spend less than we earn. You can contact her here.
93 Comments
It's not easy but doable if you have the right mindset
No, Lynda. Peddle your boomer-bait "Eat less avocado on toast, and get a second job" nonsense elsewhere. When the median house price rises by $100k in a month, it doesn't matter if you never purchase another coffee in your entire life - your ability to save a little bit extra each month makes bugger all difference. The problem with housing affordability in this country is not that the youth of today don't work hard enough, or spend too much on frivolous things like eating, its that the property market is fundamentally fucked, end of.
And we still expect to take the younger folks' wages to pay $14 billion in old age Universal Basic Income benefit, and $2.5 billion per annum in landlord rental yield welfare subsidies, and price subsidies over and above that - all while disproportionately carrying the tax load so property speculators can freeload.
Add in the $12 billion of welfare handouts for property during COVID via the cost to taxpayers of the RBNZ's property market stimulus, and we really should be seeing a little more self-awareness from the talking heads and their audiences.
It's all very well expecting younger working Kiwis to fund things, but a little realism and honesty about how they're being shaken down by certain speculating segments of older cohorts would be preferable, over these silly bait articles.
Sounds like you have no hope Rick?
Superannuation was paid for by their taxes, and as had been said, a lot of them still work and pay tax anyway. A lot of naivety from you and others on this front but c'est la vie.
I support the removal of the accommodation supplement, this is inflationary. Tents, I think that is the answer as unfortunately the last government has taken all the motel rooms for emergency housing. (another Labour kiwibuild failure dividend)
Your misunderstanding of the tax profile in NZ is persistent, it's almost like you are ignoring the facts. Actual tax load falls on those who earn over $150k per annum (70% of the net tax load), these same people are your property investors. Your welcome :).
Folk favouring a tax regimen that results in the world's worst housing bubble, lagging productivity, and underinvestment in productive business accuse others of misunderstanding tax. More at six.
As someone has a high household income, I'm well aware that we and other working Kiwis disproportionately bear the tax load because NZ does not adequately broaden its tax base and require property speculators to contribute their fair share. (As John Key once noted, if you make $100k one way and pay tax on it it's fair that if you make $100k another way you pay tax on it.) As a property owner, I'm also well aware my household benefits from our policy position of welfarism for property.
Moreover, the universal pension - and the earlier removal of surcharges on income above that - was instituted as part of a more reciprocal society in which debt-free entry to work and affordable housing were provided to today's older generations by their elders, in return for which younger generations funded the pension of the old. Correction to your point - today's oldies have not paid their own pension, it was part of this reciprocal model one side of which has been undone.
Thank you for my welcome, it was good of you to return it to me.
Given your fervour Rick, I assume you only own your own home. I cannot believe you would be so hypocritical as to own an investment property.
The guidelines you outline with regards to the universal pension seem made up (shocker more at 6) figments of your imagination. Today's oldies have paid so much into this country that it could never be repaid. Have you used electricity or perhaps one of our sealed roads? (I just heard a 70 year old yell "your welcome" from outside)
I think given your obvious social justice agenda perhaps a future in politics might be worth you considering, God knows you could not do any worse than the last set of clowns. If I might suggest a party name? Champagne Socialists of NZ? ;) (https://en.wikipedia.org/wiki/Champagne_socialist)
You'll see NZ Dan pointing out below that it's unlikely - once factoring in debt-free education and training and affordable housing thanks to preceding gens - that they've overpaid considering what they'll also claim in pension and healthcare costs. Bearing in mind that the Clyde Dam was probably the only hydroelectric project ongoing when today's 70-year-olds were in their working years - your claim they built everything seems a little akin to thanking them for fighting in World War 1 and 2 too... (of course, we also debt fund to span generations and we've been doing a bunch of that at local levels to avoid raising rates, leaving the cost for followers). Accurate username, in fairness.
Perhaps we just need more free market price discovery and less welfarism - this tut-tutting "socialist!" at the younger generations while having received far more than them and still expecting a universal welfare benefit and property subsidies from the young's taxes exhibits quite the cognitive dissonance. Who's the real "socialist"...
Yes - I own my own home, not residential investment property. Though one might point out that your making that argument against the likes of Bernard Hickey (who calls for less welfarism for property while investing in property to protect his children) is simply doing this: https://knowyourmeme.com/memes/we-should-improve-society-somewhat
What's also funny about this whole "we built this" claim is that only a minority of the population would have actually built these things.
Gillespie points out that beyond the lake, another transformational factor came with the dam — hundreds of construction workers with energy and money.
"Those who worked on the dam were paid pretty good money.
Would be like you or I claiming to have built the Central Interceptor or Transmission Gully. I did supply about $1m of materials to TG, so "I helped build it".
https://www.nzherald.co.nz/the-country/news/how-the-clyde-dam-transform…
I think you should do some more research, the twizel dam complex and the clyde etc were all built from 65-85 right in the middle of retires tenure. The majority of our B roads were also paved in this time period.
You may have noticed that the boomers have not been in power for the last 7 years so are we saying that they are still responsible for today's tax regime? I know you are very anti-rental support payments and I agree they are not helpful, what is the solution you are offering?
Why do you think I specifically cited the Clyde one as probably the only one today's 70-year olds were reasonably involved in funding, due to their age.
Solution for demand side subsidies? Easy - not have them. There are plentiful policy approaches that would enable affordable housing such as today's 70-year-olds received from their forebears rather than constraining supply and subsidising demand, as we do today. All that lacks is the political will, because it's swamped by entitlement mentality from subsegments of older property owners.
Rick, you are wrong on at least one point. I have a 70 + year old close friend who worked building the Aviemore dam when he was in his very early
twenties and there were many more like him. We worked every "holiday" twice or thrice a year to pay our University fees and an additional
exam fee for each paper. We worked hard and we saved a bit too. Abd when we failed a paper we had torepeat the whole year, tuition and exam.The
Clyde dam is much more recent than that. Yes we current pensioners did build the infrastructure and the younger generation should be thankful for
that.
Come now, it was immigration pumped population growth that blew the gargantuan property bubble. That, and interest rates designed to force spending in a deflationary environment. Put the two together and surprisingly humans did what humans do. If it was tax policy, other western countries wouldn't have mirrored our exact same property bubble, regardless of their tax policies. But keep the zombie tax meme alive.
Come now, it was quite clearly more than just immigration policy. It was:
1. Tax policy advantaging property and investor deposits (and open toleration of speculation for capital gains while evading tax)
2. Zoning policy and NIMBYism
3. Welfare subsidies for demand
4. Regulation in response to industry failures, e.g. leaky buildings
5. Immigration policy.
It's certainly possible to support a large population without blowing a speculative housing bubble. All that lacks is the will - where that should be we instead have politicians chock-full of property conflicts of interest and entitlement mentality.
Paid for by their taxes..... Let's crunch some numbers. The average pensioner (if partner is alive) today receives $20k p.a. $25k if solo. The average life expectancy is 82 so 17 years on the pension x $20k, that's $340k until they die on average.
Today's median salary is $62k. They pay $12k in income tax. Will take 28 years of a median income earner's entire PAYE just to self fund their pension. I've left out inflation as the assumption is the pension increases with wages/inflation.
There are loads of people getting the pension who didn't work hard all their lives and who are not infirm at all. That's by design - the criteria for deserving it are nothing to do with either current bad health or previous work history. So its welfare but it isn't welfare 'for' people who worked hard all their lives and are now unable to (although of course there are plenty of people who do get it who meet those criteria). We could deliberately design a system that rewards work (for example tying the pension to previous work history or tax contributions) or bad health (like the disability allowance). But that is NOT the system we currently have.
Today's median salary is $62k.
The sad thing being that due to the doubling of the minimum wage in the last decade, the minimum wage currently sits at Gross $47,216. Main centres such as Auckland, Wellington and Christchurch may have had large pay increases in the last 3 years however there will be lags in the rest of the country. Imagine earning 60k say 5-8 years ago and being relatively comfortable and having this eroded away year on year by not only inflation but by those doing far less work getting more and more per year thus eroding the value of your work.
That old argument of "Superannuation was paid for by their taxes" always cracks me up. That is true of course, as long as those superannuitants never used a public hospital, road, park, library..... you get the point. Those taxes are generally 100% spent in the year they were collected. If they werent, every govt would be in surplus. Dont get me wrong, I'd like to have a govt superannuation payment coming my way by the time I retire, and I get promises made by successive govts should be honoured. Reality is it will be either non existant or substantially less than it is currently by the time I retire in 20+ years time. Those that recieve govt super now are entitled to it in my opinon, but you can drop the " my taxes paid for it" line
Sweet. So how much debt is going to be issued to fund a) the $1.2b per year increase in non-means tested Superannuation spending b) the reinstatement of mortgage interest deductibility for landlords? How much risk premium is added to that $1.2b per year?
Do you think maybe we find that whatever is "recycled" from $18b NZ super just ends up funding their universal healthcare costs? I.e. a very much wasted exercise? Why not cut it back to $10b and build some hospitals?
I really have no idea? Depends on the mix of cost cutting, to tax cutting I guess? As I said, super is recycled through the economy and not only healthcare. My nursery business used to have many on super as customers. They did become increasingly cautious as the value of their life savings was trashed, with zero return, to stave off deflation in an environment where their fixed costs were still exploding. But hey, as long as foreign speculators were allowed to run rampant, so Sir John could pick up his cushy job selling debt, Ximon Bridges could fawn and judeath cultivate non partisan benefits, all good.
In that case, I'll selflessly volunteer to recycle an extra $20 - $25k a year (courtesy of the Government of course) through businesses and taxation. I'll even take one for the team and promise to spend it on holidays and eating out and consumer goods rather than using it to pay my mortgage, so it will generate tax revenue in the form of GST too.
I wont refuse super on retirement. If there were a referendum seeking to means test super, I would vote in favor. I might be against frivolous welfare for old people, but I'm not a moron.
But if I reach retirement and I have the means to look after myself comfortably, then I'll most certainly still collect the pension but either give it to charity or give it to my children/grandchildren. You'll have to take my word for it.
Household net savings can only come from government budget deficits and not by simply spending less as this only deprives others of income and savings.
https://theconversation.com/how-government-deficits-fund-private-saving…
Well a lot depends on the attitude of your parents. I know some that have helped their kids into houses big time with deposits and others that have a million in the bank and are not helping at all leaving you with a mortgage still at 56 that could easily be wiped out tomorrow. Lets be realistic you are not really interested in buying a house at 20 anymore, there are much more fun things to do with your money so by the time things change with age its a bit late to start that saving unless you have a really well paying job and your partner has the same.
Err, yes it has. I know people who bought in the 90s as a single wage earner. One of them even had a single flatmate whose rent covered the mortgage payment. (Not even counting the likes of Paula Bennett whose first home was a Housing Corp loan with the payment covered by the DPB.)
Time to move on from our present policy mix toward policy aimed at making homes affordable rather than inflating them, as our older generations benefited from? Definitely.
The present policy of inflating housing to enable older folk to live beyond their productive means via free wealth from houses doesn't work for multi-generational ends.
Yep - Mid 90's my dad was a single parent of two pre-school kids, recently divorced (with minimal assets) and unemployed. He found a job when we started school and purchased a flat in central Auckland like a year later. Mortgage got paid off before I even finished high school, without any help from a partner. Same house today would cost $850k+ or at least 10 times my after tax income. In the block of 5 flats there is probably only one resident who could afford to buy their place at today's prices.
you are not really interested in buying a house at 20 anymore, there are much more fun things to do with your money so by the time things change with age its a bit late to start that saving unless you have a really well paying job and your partner has the same
Fun things, sure, but there is also vastly more opportunity to earn overseas while travelling and doing fun things, thus allowing many to save and spend. Someone I know recently went to London as a recent law graduate and was offered 150k NZD equivalent starting wage with another large raise after 1 years employment. Hence why many leave NZ and return later should they choose, after making larger money abroad in a more valuable currency. When you can earn 60k in 3 months driving a tractor in the middle of nowhere north of Perth, why stay in NZ and slave for a year for 60k and suffer a higher cost of living.
Average wage earner in Auckland would need 15 x Salary to get small house on a tiny section, and would need 10 years to save 20% deposit if living at mum and dads till 35 free of charge. House price’s are already down 20% in many areas the next phase down will come quicker as this market is in a large bubble and with rates staying around this level should provide the pin to burst the bubble.
Million dollar mortgage over 30 years at 3% was a weekly payment of $970 now after refinancing $1760 per week at residential base rate only a matter of time before this financial burden causes many to sell. Add to this to get a million dollar mortgage now from scratch you need to be earning $180000 per annum have $200 k in cash for deposit Zwifter you have to very naive if you think immigration is going to stop this crash continuing.
Sell and do what ? The mortgage is number 1 spot even if you have to live on baked beans. Renting is still going to kill you and if everyone tries to sell, the rich just buy up the houses and put the rent up. Its a never ending circle, you simply don't get a million dollar mortgage unless you can repay it.
Well said, reality is quite uncomfortable.
I am not defending how broken the housing market it is, but it is the reality we all live with.
People who are thinking immigration (of the current un-managed completely broken kind) will save house prices need to think some more on this. These immigrants are not going to buying a house here. (full stop) Not going to happen.
Housing will keep coming down is my guess possibly in absolute terms but certainly in inflation adjusted terms. The issue with rentals is not just pricing which is high but availability, an unvirtuous circle.
As an immigrant I concur.
The gulf between intrinsic value and market value for the average home is insurmountable. Particularly in Auckland.
I own a 300 year old 3bed 2bath cottage with large garden in a picturesque village (back in the motherland), well developed transport infrastructure to a variety of major towns and cities. If I sold that house I'd still need to take out a $400,000 mortgage to buy a shoebox made from polystyrene in an area plagued by shootings and hammer wielding robberies and sit in traffic for an hour each way to get to work.
Nope I'd rather pay rent to live in a nice area and still save money vs the mortgage payments.
Investors are gone, buying a house for a million plus and renting in out for $900 per week is crazy when you can get 60k in a term deposit with no risk. Renting it out would get you 45k then you have to pay rates,insurance, maintenance Zwifter hope you get some financial advice if you think rich people would waste money like this. Like you said you have to be able to afford to buy and only maybe 10% of the population can buy in Auckland from scratch. Please don’t tell me you have purchased a million dollar small property in Auckland. Many have and after refinancing are losing 2k a month on each rental they have, and are unable to sell without losing 20% of purchasing price as prices have crash that much in many areas over last 18 months
There's one minor problem there. For many of these investors to spend $1m on these properties, they use equity backed mortgages. They're often paper rich and very cash poor too, which is why the removal of mortgage interest deductibility is such a thorn in their side.
Unless they can borrow $1m and chuck it in a term deposit?
If you are feeling stuck on the road to saving for your house deposit, I know where you’re at, I have been there too.
Was this back in the 80s when you could get a house for $10 and a jar of pickles?
This article is so out of touch it’s offensive to FHBs. Peddle your boomer rhetoric elsewhere.
With NZD tanking, inflation will stay well above 2% narrative and rates will not come down for years. Why would young people burden themselves with huge mortgages costing them over 60% of income to service. The house prices will crash as young people just can’t afford to buy and the world is changing owning a property is just not worth the stress at these price levels for young couples. In many countries throughout Europe renting is the norm all the government has to do is put restrictions on rent prices this would take prices down very quickly.
Gaslighting.
Telling people they can save for a deposit with NZ incomes is a type of mental abuse and not fair.
Much more responsible advice for a young person is to go to Australia to save and come back with a deposit if you want. You can spend more and save a lot more at the same time (I did this flatting in Bondi 10 years ago).
It fixes the problem for that individual. Let's face it egalitarian NZ, the social contract is dead. Our leaders are inflating the problem, our biggest beneficiaries tut tut about eating too much avocado toast and we work two jobs for rent.
We're in late stage consumerism baby, the individual is king, f××k interdependence and social cohesion; build me a fence and get off my lawn.
I wouldn't say it is being loyal to the country is a mistake, more so being loyal to systems and policies that are outdated and predominantly benefited a specific cohort in NZ which despite all efforts, seems impossible to change (by restarting the housing ponzi under the current govt).
I honestly don't get this "go to Australia" fallback. Houses in Australia's main cities are just as expensive as in NZ (if not more expensive!). Plus there is a stamp duty tax to pay when you purchase real estate (though admittedly there are some concessions in most states for FHBers), which means you'll have to fork out even more money upfront than in NZ.
Firstly we're talking about saving for a deposit when you're in your 20s & 30s flatting. There's 20 years you could be saving a whole lot more than in NZ. I did it and it was an unbelievable difference moving over in the same job and seeing how much money was left to save.
Secondly, their houses should be much more expensive than NZ because of their incomes but they aren't, so in most places houses outside of Sydney are more affordable there.
I’ve been looking in Australia and prices are in general much cheaper. There are exceptions or course but I know people who have moved and are paying the same rent in Australia as NZ. The difference is they are in a major city with a really flash apartment vs an old shitbox in a small NZ city/town (one of the better ones). Good food is cheaper, general costs are cheaper I.e. phone, power, no need for sky as sports are free to air. The smart young people need to go….that’s my take on it
Yes and those are all reasons why I had so much spare cash to save each month. I'm actually passionate about telling young people because you don't understand properly until you get there and then you wish you'd done it sooner. They should have no loyalty to NZ given what's most important in this country (even higher house prices).
It's the investors with their banks attributing equity as their next deposits that are your real enemy, and governments for squeezing in more people, and then openly selling out to foreigners.
Sorry if I came across to you as smug I'm just trying to help others actually, because I don't think NZ deserves people like you that stay.
You're not wrong. a family member bought in Perth a couple of years ago and got around 70k in various first home buyer grants from the state govt and other bodies to contribute to a new build house that cost 400k on a reasonable section in a reasonable area with key public transport routes only 2 blocks away and 20min in to the CBD making use of it. They earn well and have a solid plan to have paid down a large volume of the mortgage in only 2-3 years.
I have been living in Australia for a few years now (my parents live here) and am looking to buy a house here. And while I look I keep wishing I was still in NZ because outside of Auckland and Wellington you can get some pretty well priced properties in NZ, and you don't have to worry about Stamp duty or other taxes. I guess we all have our personal experiences and I guess the grass is always greener on the other side, right?
This unavoidability in housing is a phenomenon that has hit the whole of the western world, it is not exclusive to NZ and I doubt it can be escaped by leaving NZ to other western countries.
Australia for example just had over 300,000 new migrants settle in Aus this year (if I am not mistaking), which hugely exacerbated the existing housing and rental crisis, just like in NZ. if you want to be one of those hundreds of thousands fighting for a property in Aus, away from your friends and family, after having uprooted yourself from your home, then by all means, immigrate to Aus. Otherwise I reckon it's probably better to just move to a smaller town in NZ where house prices are cheaper than in the unaffordable big centres.
This in particular strikes me as a disastrous idea:
Have positive visual reminders of what you are saving for, like pictures of the house, neighbourhood, interiors you like.
Having pictures of the things you like is only going to set you up for massive disappointment. Unless you are massively wealthy, spending heaps of time thinking about what you like rather than what you can afford is a very bad idea. It's just going to make it more difficult for you to have realistic expectations when the time comes.
Empower the individual instead of fixing the fundamental issue.
While we're at it, we can help starving children in Africa by sending them laminated pictures of roast dinners to hang on the walls of their Rondavels. That sort of positive visual reminder will drive them out of starvation for sure.
Spot on, Al123.
Better advice might be to put up pictures of the kind of house you might be able to afford after living on water, bread and baked beans for your practically whole life, or at least the part of it that matters.
"So listen up, you hard-working, well-educated young kiwis: Go paste pictures of tiny, rotten hovels situated in crime-ridden streets on your fridge to help you keep your eyes on the prize.."
There is a basic lack of understanding of what is a universal law, i.e. in any system, all the benefits will flow to the most restricted part of that system.
Lovett Brothers invented modern-day mass house building, and suburbia understood this well. It wasn't enough to have readily available land, labour, timber etc, when not having enough nails would completely slow down the process and drive the price of nails up. Thus they were totally vertically integrated, even owning their own nail factories.
This restriction of a system can also be applied to how country economies work, thus any saving that an inspiring homeowner makes in NZ only increases demand on an always limited supply of housing (a restriction), forcing up the price of the house. And the most restrictive part of the housing is the land use policy and now interest rates.
In this present system, you will never be able to save fast enough to counter the increase.
Lynda, that's a great article! Saving for a house deposit can be challenging, but your tips are spot-on, especially #2 about automating savings. For first-time buyers, Unity offers fantastic options to help you reach that deposit goal faster (www.unitymoney.co.nz/get-a-loan/first-home-loan/). I recently heard that large banks are also venturing into 5% deposits for homes, with strict criteria obviously (www.stuff.co.nz/money/350183623/major-bank-opens-doors-5-deposit-home-loans). Really hoping this is how I can get in, if viable of course. I'm honestly tired of paying sky-high rent and not having my own place. Saving is crucial, but knowing your financing options is equally essential. As a young advisor, I see firsthand how challenging it can be, especially with rising costs.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.