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Future Looking Bright for First Home Buyers
First home buyers and property investors are returning in force, but does anyone know what might happen next?
First home buyers with a ready deposit and stable employment have been making the most of falling interest rates and the loosening of lending rules. This is part of the reason there has been a surge in activity in the housing market.
Younger Kiwi’s Still Love Property
It had recently been suggested younger generations might not have the same love for houses that older Kiwi’s do. There was some who thought younger New Zealanders might be more inclined towards cosmopolitan apartment living, perhaps in-or-near city centres to avoid lengthy commutes. The lockdown years destroyed such theories, and nowadays more people work from home, so the Kiwi dream of homeownership seems as relevant as ever.
Supporting this, mortgage interest rates have been rapidly falling of late, while house prices have cooled in most places.
A Window of Opportunity
The current situation has created a window of opportunity for the ready and willing first-time buyers to get on the property ladder. The same can be said for first-time real estate investors.
The data supports the theory first home buyers are making the most of the situation. In the current softened property market, New Zealand first-home buyers are making a substantial impact, representing over one quarter (27%) of all property purchases. This figure surpasses the long-term average of 21%, signalling strong activity from this segment despite the ongoing challenges in housing affordability, according to the latest CoreLogic First Home Buyer Report.
NZ Chief Property Economist Kelvin Davidson said, “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 also noted that to date, the removal of the First Home Buyer Grant scheme has not been a noticeable barrier for the segment.
Based on our experience helping first home buyers, we are seeing them access various strategies to overcome these hurdles, such as low deposit lending options, accessing KiwiSaver funds for deposits, and making compromises on property locations and types.
KiwiSaver First Home Withdrawal
As a side note, pleasing investment market performance has bolstered KiwiSaver and investment scheme balances. This was led by the substantial US market which forms the backbone of most investment funds in New Zealand, including most KiwiSaver Schemes. For first home buyers, a larger KiwiSaver Scheme balance can mean a slightly smaller home loan is required, which improves affordability.
Learn more:
House Prices Down for Most First Home Buyers
Recent trends indicate a decline in the median price paid by first time buyers – from $715,000 in 2022 to $685,000 in the first nine months of 2024.
This drop occurs even as standalone houses, which are typically larger and more expensive, constitute a larger proportion of first home buyer purchases. This suggests first home buyers are getting ‘good deals’ in the current conditions.
First Home Buyers Across the Country
Looking across each of the regions, the strength of first home buyers is near universal.
Among the main centres, the strongest market share for first home buyers over the first nine months of 2024 has been wider Wellington, at just short of 35% of purchases. Tauranga is 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 is widespread with both Hamilton and Tauranga 7% above normal, with that gap sitting at 5% in Wellington, and 4% across Auckland, Christchurch, and Dunedin.
Meanwhile, a similar margin applies in ‘next tier’ locations such as Nelson and Invercargill, as well as smaller areas including Horowhenua, Ashburton, and South Waikato.
New Build as a First Home
To help keep costs down, many first home buyers are purchasing ‘new builds’ in the form of house and land packages. Getting mortgage approval can be slightly harder, but buying a house and land package can save significant upfront cost when compared with buying an already built home.
Learn more: New builds versus existing properties
What Next for the Housing Market?
The outlook for first home buyers, although likely to be a little more challenging, still holds promise.
It could be lower interest rates continue to motivate first home buyers, despite expected increased competitive pressure in the housing market from property investors. Additionally, certain banking allowances for lending outside standard debt-to-income ratios could support first home buyers in pricier markets.
If you’re a potential first home buyer or property investor, (including if you’re an existing homeowner), it’d be the pleasure of one of our team to have a complimentary and no-obligation initial chat to see how you can make the most of the current situation. Let us know your details and we’ll be back in touch within a workday.
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