First home buyers at record high: will it last?

Thursday, 6 February 2025

First home buyers’ share of property purchases hit a record high over the 2024 year.

First home buyers' share of purchases hit a record high last year, but that could change as the market picks up over the coming year, a property researcher says.

New CoreLogic buyer classification figures show first home buyers were responsible for 26.1% of property purchases over the full 2024 year.

That beat the previous record of 25.7% in 2023.

CoreLogic chief property economist Kelvin Davidson said first home buyers were benefiting from reduced competition from other buyer groups.

Relocating owner-occupiers “only” accounted for 26.5% of activity last year, which was about 2% below their average, while investors’ share of activity was 21.7%, down from the long-term average of 24.5%, he said.

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“But to say that first home buyers’ strong performance was simply due to the weakness of the other buyer groups would not be entirely fair. Other factors have contributed too.”

Those factors included access to KiwiSaver for at least part of the deposit, making full use of the low-deposit lending allowances at the banks, and getting around the loan-to-value ratio rules by buying new build homes.

In contrast, relocating owner-occupiers often had to sell before they could buy, and the number of other sales in order to complete their sale, or real estate chains, to do so had increased from an average of three to about six or seven, he said.

“There’s also lots of stock on the market, with total available listings high, and first home buyers have been taking advantage of that choice, and the soft market.

“The median price they paid last year was $698,000, down from $719,000 in 2022.”

But first home buyers’ market share was not likely to hold at the recent record highs, Davidson said.

That was because market conditions were starting to improve, with interest rates coming down and greater buyer confidence in evidence.

“For relocating owner-occupiers that should help reduce those chains, lead to great liquidity, and attract more back to the market.

First home buyers’ share of the market is likely to drop from its recent high, CoreLogic’s Kelvin Davidson says.

“Conditions for investors have shifted too, with 100% interest deductibility back and lower mortgage rate making for lower top-ups on rental properties.”

While investors’ market share remained low compared to the historical average, it had started inching up last year, and the “vibe” he was picking up from investors was that purchase interest was rising, he said.

“As more relocating owner-occupiers and investors return to the market, their share of purchases will increase to more normal levels, and as they do it will impact on first home buyers’ market share.

“It might prompt fears that first home buyers are being shut out again, but a lower market share won’t mean their demise.”

Lending conditions remained favourable for them, it was still a buyers’ market with high stock levels and softer prices, and debt-to-income ratios were now in force and likely to have a greater impact on investors, he said.

“Even if investors and relocating owner-occupiers do take a greater proportion of activity in 2025, first home buyers are still likely to buy a higher number of properties than they did last year.”

That was because while the number of first home buyer purchases last year was solid at about 20,850 purchases, it had been stronger at points in the past.

House sales are expected to increase to about 90,000 this year, Davidson says.

Davidson said the total number of sales across the market remained below average at 80,000 last year, but he expected sales to increase to more “normal” levels of about 90,000 this year.

With lower mortgage rates and anticipation the economy was starting to improve at play, it would not be a surprise to see a higher number of sales across all buyer groups, he said.

Economist Tony Alexander surveys real estate agents to get their take on the market regularly, and his latest survey showed first home buyers continue to be very active.

A net 48% of agents reported they were seeing more first home buyers, although that was down from 57% two months ago.

In contrast, only a net 12% of agents said they were seeing more investors in the market compared with 36% two months ago.

And 24% of agents said that nothing was motivating investors to buy, up from 16% at the end of November.

Apart from a falling away in the middle of last year, first home buyers had been driving the market since the start of 2023, Alexander said.

“For investors, the lure of residential property is much weaker than on many occasions in the past. Inability to offset cash losses against other income sources for tax purposes remains.

“Costs of running rental property have soared, interest rates are well above pandemic and 2016 to 2019 lows, and no momentum of upward price movement has yet become solidified in this cycle.”