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First home buyers capitalise on soft market

Thursday, 7 November 2024

First home-buyers are likely to get some welcome news, as the Reserve Bank is expected to signal an easing in lending restrictions when it releases its six monthly update on the health of the financial system.

It’s a first home buyers market, with those yet to own their own home set to capitalise.

A report based on the CoreLogic Buyer Classification series found first home buyers remained a key presence in the property market, consistently accounting for more than one quarter (27%) of purchases, comfortably above the long-term average of 21%.

The median price paid by first home buyers had fallen in recent years, from $715,000 in 2022, to $695,000 last year, and $685,000 across the first nine months of 2024.

NZ chief property economist Kelvin Davidson said that was despite standalone houses, usually larger and pricier properties, making up a higher share of first home buyer purchases this year, sitting at 73% of purchases this year, compared to 70%.

The median price paid by first home buyers had fallen in recent years, from $715,000 in 2022, to $695,000 last year, and $685,000 across the first nine months of 2024.
The median price paid by first home buyers had fallen in recent years, from $715,000 in 2022, to $695,000 last year, and $685,000 across the first nine months of 2024.

“This signals that first home buyers are getting ‘good deals’ in the current conditions,” he said.

Among the main centres, the strongest market share for first home buyers over the first nine months of 2024 had been wider Wellington, at just short of 35% of purchases. Tauranga was at the other end of the spectrum, at 23%.

However, when you compare the latest figures to their historical averages, the relative strength for first home buyers was widespread with both Hamilton and Tauranga 7% above normal, with that gap sitting at 5% in Wellington, and 4% across Auckland, Christchurch, and Dunedin.

CoreLogic chief property economist Kelvin Davidson.
CoreLogic chief property economist Kelvin Davidson.

Davidson said first home buyers were utilising a number of different strategies to secure a property.

“Many first home buyers are still proving successful, taking advantage of low-deposit lending speed limits, tapping their KiwiSaver for part of a deposit, as well as showing a willingness to compromise on location and property type.

“The allure of ‘a foot on the ladder’ clearly remains strong, especially in the current market where house prices are down and abundant listings favour buyers.”

He noted that to date, the Government’s removal of the First Home Buyer Grant scheme had not been a noticeable barrier for the segment.

Davidson said the outlook for first home buyers, although more challenging than 2024, still looks promising.

“There’s a sense that mortgaged investors may start to become more active again in the next 12-18 months, meaning that first home buyers will face increased competition.

“Nevertheless, it’s entirely possible that lower interest rates will still continue to drive more first home buyers in absolute terms.”

He expected a proportion of the 20% allowance for banks to lend to owner-occupiers outside the debt-to-income ratio restrictions would prove helpful, especially in the more expensive regions.

“All signs point to first home buyers continuing to hold onto an above-average share of property purchases in the next 6-9 months, given other groups including investors are still facing challenges.”