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The 'Share Market': Get in housemates to pay off your mortgage

Tags: Property Insight Residential

Twenty-somethings wanting to make their first step on the property ladder should buy a house and bring in housemates to help pay off their mortgage, according to a property expert. And the figures add up...


Those struggling to enter the residential property market could find themselves paying as little as $191 a week in mortgage repayments by taking a business approach to their property purchase.

National residential manager for real estate agency Bayleys, Daniel Coulson, said buying a four-bedroom property in an up-and-coming suburb and splitting the mortgage with housemates was more cost-effective than trying to repay the mortgage on a typical entry-level apartment.

This method could help prospective buyers save money and achieve their ambitions of buying a home in the suburbs, he said.

“Ever-increasing house prices and the expense of solo renting mean that many people are left with no other choice but to share a house or flat long after they would have expected. It’s common for people to still be in a house-share in their mid-thirties,” Mr Coulson said.

“For many New Zealanders, living in a house-share is a rite of passage. It’s also the best way they can save money for their first home.

“Although an apartment may be the cheaper option upfront, buying a house will set them up nicely when they no longer want to share and wish to settle down and start a family.”

He added: “The news will be especially heartening for parents who want to help their children onto the property ladder, particularly in Auckland’s challenging market.

“If the parents have equity in their own home, they can use it to help their children with the deposit, or act as guarantors on the loan.”

Bayleys research compared the weekly mortgage bill for a one-bedroom apartment in central Auckland with the mortgage commitment for an average four-bedroom house in Onehungha, Mt Roskill, Glenfield and Henderson.

The repayments were calculated using a 4.99 percent 5-year fixed rate home loan from Kiwibank – the lowest in the home loan sector at the time of writing – stretched over 30 years, with a 20 percent deposit.

“The house repayments worked out to be markedly cheaper than the unit’s – if the houses were run as house-shares,” Mr Coulson said.

“By leasing out their remaining rooms at the current market rate – which in Auckland ranges from $100 to $300 depending on the suburb – the house-buyer could pass on the burden of their mortgage bill to their housemates.

“In fact, the owner-occupier of a house-share in Henderson could find their share of the mortgage bill as low as $191 – less than half of the $402 a week needed to repay the mortgage on an average one-bedroom apartment.”

 The figures show the sharp contrast in repayments with and without housemates:

*Based on average room rate in individual suburbs

Even without the 20 percent deposit, the weekly repayments, minus the rent, are still within the grasp of the average Auckland salary of $45,854:

Mr Coulson said: “When you factor in the savings you’d make from sharing utility bills with three other people, it’s clear that those buying a house will come out significantly ahead than those renting over the long-term.”

He added: “The benefits outweigh the drawbacks over the long-term. The rental income would go a long way to reducing the home-owner’s mortgage and bring it to a manageable level when they wanted to ‘go it’ alone.

“Due to the associated land value, house price growth will always outperform apartments. The increase in urban intensification in Auckland to meet the demands of the city’s booming population – expected to hit almost two million by 2025 – puts land at a premium.

“Those who buy freehold land now in suburbs that are only going to increase in desirability, due to their proximity to the city centre and good transport links, will be sitting on healthy capital growth.”

Click on the table below to expand

 
*Using 4.99% 5-year fixed home loan rate from Kiwibank over 30 years 
** Based on average room rate in individual suburbs

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