First home buyers using different strategies to enter the market
First home buyers (FHBs) were responsible for 27% of all property purchases across New Zealand over the first nine months of the year, according to CoreLogic, well above the long-term average of 21%.
FHB market share was also strong throughout the country, ranging from 23% in Tauranga to 35% in Wellington.
CoreLogic's analysis also identified two interesting facts regarding the median purchase price being paid by FHBS.
First, this has fallen from $695,000 in 2023 to $685,000 across the first nine months of 2024, despite the fact that houses now make up a larger share of FHB purchases (70% in 2023, 73% in 2024).
Second, while the FHB median price is lower than that of all buyers ($760,000), it's significantly higher than that of the bottom 25% of all buyers ($562,950). In other words, the typical FHB doesn't always start at the bottom of the property ladder; sometimes, they start several rungs up.
How first home buyers are succeeding
CoreLogic Chief Property Economist Kelvin Davidson said FHBs were using several different strategies to enter the market.
“It’s never easy to get that first home and stretched housing affordability – despite falling mortgage rates – remains a key challenge. But many FHBs 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,” he said.
To date, the removal of the First Home Buyer Grant scheme has not had a noticeable impact on FHB activity, according to Mr Davidson. Nevertheless, affordability constraints were forcing FHBs to change their behaviour.
“If you go back to 2019 and 2020, standalone houses accounted for more than 75% of FHBs’ purchases, suggesting that as affordability constraints have intensified over the past few years, FHBs have been prepared to change too,” he said.
Positive outlook for first home buyers
Mr Davidson said that while the outlook for first home buyers had become more challenging, it remained promising.
“There’s a sense that mortgaged investors may start to become more active again in the next 12-18 months, meaning that FHBs will face increased competition. Nevertheless, it’s entirely possible that lower interest rates will still continue to drive more FHBs in absolute terms,” he said.
Mr Davidson also noted that FHBs would benefit from the fact banks are not required to follow the debt-to-income ratio restrictions for up to 20% of their owner-occupied lending.
“All signs point to FHBs continuing to hold onto an above-average share of property purchases in the next six to nine months, given other groups including investors are still facing challenges.”
Many parts of the country have excellent buying conditions right now, with prices flat and listing numbers high. So now could be a good time to buy your first home, assuming your financial position is secure. As your mortgage adviser, I can help you secure a competitive loan and explain how the buying process works.