It's a first home buyers market, according to latest CoreLogic data

Thursday, 22 August 2024

Auckland homeowner feels relief as the Reserve Bank cuts interest rates for the first time in 4 years. With mortgage rates easing, he hopes to sell his investment property and ease financial strain.

CoreLogic’s August Housing Chart Pack showed property purchases across New Zealand by first home buyers increased to 27% in July, up from 26%.

Christchurch had the highest share of first home buyers, higher than the national figure, at 28%.

Property values had also lost its momentum despite New Zealand’s residential real estate market being worth a combined $1.62 trillion.

First home buyers are dominating the property market even as they battle affordability constraints.

CoreLogic’s August Housing Chart Pack showed the share of property purchases across New Zealand by first home buyers (FHBs) increased to 27% in July, up from 26% in Q2 and well above the long-term average of 21%.

CoreLogic NZ chief property economist Kelvin Davidson said those buying their first home were taking advantage of the low deposit lending allowances being offered by banks.

CoreLogic chief property economist Kelvin Davidson.

”Given the recent loosening in the loan-to-value ratio rules it’s interesting to see that FHBs currently absorb 75-80% of banks’ overall allowance for low deposit lending to owner-occupiers,“ he said.

This meant two in every five FHBs were getting into the property market with less than 20% deposit, and the Reserve Bank’s rate-cutting cycle was likely to reinforce their presence, he said.

FHB activity had been solid for several months now, and from January to July this year the group purchased more than 11,000 properties, up from around 9,400 in the same period last year.

There were also elevated available listings on the market which was giving more choice for buyers in general, and FHBs in particular, which was also feeding into weakening price pressures.

“Total listings sitting on the market are around 25% higher than the same time last year, meaning many buyers can probably get a cheaper price and a better house than they thought,” Davidson said.

Property values had also lost its momentum despite New Zealand’s residential real estate market being worth a combined $1.62 trillion.

In the main centres, Wellington retained the largest decline with values falling 21%.

The smallest decline was in Christchurch where values fell 7.1%, and was also a market where the share of property purchases by FHBs was higher than the national figure, at 28%.

“Inflation is now trending back down to the 1-3% target band and as things stand there seems to be a reasonable chance that ‘typical’ mortgage rates could drop to around 5.5% by the end of 2025,” Davidson said.

Around 64% of NZ’s existing mortgages by value were currently fixed and due to reprice onto a new mortgage rate over the next 12 months.

“Undoubtedly, the major turning point for mortgage rates is here, and that will be a support for housing. But a fresh boom doesn’t seem likely when jobs are being lost and the economy remains in recession.”