New Zealand properties are now valued at seven times the average household income. In fact, last year, mortgage repayments accounted for a massive 49 percent of gross annual Kiwi household income. (last quarter of 2023, Corelogic).
Kiwis are being locked out of home ownership because it’s simply unaffordable.
But there is hope. Buying a house with family or friends can be a great way of getting yourself on to the property ladder. Co-ownership or shared ownership is becoming increasingly common and can give each person a distinct share in the property that you couldn’t otherwise afford on your own.
In New Zealand we have two types of tenancy:Joint tenancy - where the owners have equal rights in the property (but if one person dies the ownership generally goes to the surviving owner.Tenants in Common - property is purchased in defined shares and if that co-owner dies, the share will become part of his or her estate and distributed according to their Will. |
|---|
Choose the person/people wisely though and it’s critical that you get a property sharing agreement drawn up.
Before jumping in, you’ll need to think about what each co-owner’s share in the property will be. For example, do you want equal shares? Will you all put in the same deposit? Maybe the share of the property will be proportional to the size of each co-owner’s deposit?
Property Sharing Agreements should always be drawn up on a case-by-case basis, but they will typically cover some or all of these areas.
- How the property is going to be owned and how each party’s ownership share is recorded on the title.
- If the parties are contributing different amounts to the purchase, then a clause should be included outlining what proportion is owned by each of the parties.
- Details of how the mortgage will be paid. One person may want to pay more than the others for example.
- What happens if one party fails to pay the mortgage?
- What is the decision-making process? Different parties may have different views on the need to renovate the house and maintain it.
- How will the property be maintained?
- Who is responsible for managing the property including paying the bills, organizing renovations, and managing tenants if you’re going to rent out the property.
- What happens if one party dies?
- What happens if one of you wants to sell? A common clause included in most agreements is the right of first refusal.
Depending on where you live in New Zealand, property prices can double every 10 to 12 years, so home ownership certainly has its rewards. If you think a property sharing arrangement might be right for you, get in touch, we can help you get started.