First-home buyers are taking advantage of a new builds exemption to the Reserve Bank’s LVR rules. Properties that have not yet been built or are at an early stage of construction are not subject to the 20% deposit requirement. While the exemption does not only apply to first-home buyers, it provides them with the opportunity to get on the property ladder. The exemption allows banks more leeway on lending to first home buyers, who often struggle to save the required deposit. As a result, first home buyers can build for as little as a 5% deposit, although 10% is the standard.
However, while the LVR restrictions does not apply to new builds, other factors including the escalation in the costs of construction means that aspiring first home owners must be careful in how they finance their investments. Auckland mortgage broker John Bolton of Squirrel Mortgages recently stated that the cost of building a two to three bedroom town house in Auckland will often range between $510,000 and $560,000. Click here for our previous commentary on the escalation of construction costs
Click here for more information on the new build exemption.