How the market looks for FHBs, upsizers and investors

Conventional wisdom might suggest that this would be a tricky time to be a first home buyer, given the rise in property prices and interest rates since the pandemic. However, the data points in the opposite direction.

First home buyers’ share of the market continues to hover at record levels, with their market share reaching 25% or more for each of the 12 months to March, according to CoreLogic Chief Property Economist Kelvin Davidson.

“There’s a long list of reasons why FHBs [first home buyers] have been enjoying a strong presence in the market, but perhaps the most important are access to KiwiSaver for at least part of the deposit, making full use of the low deposit lending allowances at the banks (as well as targeting new builds) and, of course, relatively reduced activity from other buyer groups,” he said.

Mr Davidson added that although affordability remains problematic, “we’d still anticipate good opportunities for FHBs, especially if/when more low deposit finance becomes available later in 2024 (as the LVRs ease) and also because there are now more listings on the market, giving finance-approved FHBs more choice and increased bargaining power.”


Upsizer activity remains restrained

The situation is different for relocating owner-occupiers, known as movers.

While their market share has hovered around 26% for about two years – higher than that of first home buyers – this is below the long-term average of about 28%.

“The cost to ‘trade up’ not only legal and removal fees but also the extra debt and/or equity that’s required is likely to have been a factor keeping some would-be movers where they are,” Mr Davidson said. 

“We suspect that a relative lack of choice could also have been an issue, i.e. would-be movers simply weren’t able to find their ideal next property. Of course, now that the stock of available listings on the market has risen, this could grease the wheels a bit for movers, and see their share of purchases rise a bit in the coming months.”


Conditions improving for investors

Meanwhile, the market share for mortgaged multiple property owners (MPOs), which includes investors, has hovered around 21% since the start of 2023.

“But there are still challenges for the mortgaged investor group in terms of low rental yields, high mortgage rates, tough deposit requirements, and the (previous) phased removal of mortgage interest deductions at tax time,” Mr Davidson said. 

“Looking ahead, some factors are certainly starting to look more favourable for movers (e.g. higher stock of available listings) and also mortgaged MPOs, given that rents are rising, looser LVRs are on the cards, 80% deductibility and a shorter Brightline test (soon) are back and also that 90-day no-cause evictions are back on the table too.”

I help buyers of all kinds, from first home buyers and investors to upsizers and downsizers. If your clients are looking to buy, I’d be grateful for an introduction.



Published: 29/5/2024