First home buyers on the rise despite soaring house prices

Source: 1News

Despite ever-increasing house prices in New Zealand, first home buyers aren’t being deterred, and their numbers are on the rise. 

That’s according to an inaugural First Home Buyer Report from property data and analytics company CoreLogic. 

Nick Goodall, head of research at CoreLogic told TVNZ1’s Breakfast first home buyers are taking advantage of low interest rates. Buyers are also increasingly using larger sums from their KiwiSaver accounts for their deposit, 

He said 24 per cent of all sales this year were to first home buyers, up from the long-term average of 21 per cent. It’s the highest level since CoreLogic started collecting information about buyers in 2005. 

“They’re adjusting their expectations too. They’re buying further from town, they’re having to buy town houses … but they’ve managed to find a way.”

But, Goodall said there were “sections of the market” who were still struggling to get onto the property ladder, such as those who weren’t getting help from their parents to save up for a deposit. 

The report also found that low interest rates, pushed down by the Reserve Bank's official cash rate level, meant it was cheaper to take out a mortgage than pay rent in Tauranga and Dunedin. 

It comes as Auckland's median house price hit $1 million in October, while the median house price nationwide increased by 19.8 per cent, from $605,000 in October last year to $725,000 this October, according to The Real Estate Institute of New Zealand (REINZ). 

It’s also amid calls to the Government to do more about house prices. National’s revenue spokesperson Andrew Bayly said last week low interest rates and the Reserve Bank’s quantitative easing measures “are simply adding fuel to the fire of New Zealand’s broken housing market”.

Goodall said “one of the most surprising things” the report found was that first home buyers were paying a median price of $565,000 nationally, compared with a lower quartile figure of $430,000 across all buyers.

That compares to an overall $619,000 median price buyers were paying across the market. 

“They are stretching to that higher amount,” he said of first home buyers.

Goodall said “a chunk” of buyers in the market were returning Kiwis, but “it’s not quite the flood of buyers that we’ve maybe heard”.

As for the Reserve Bank's removal of loan-to-value ratios, which usually restricted the amount of high-risk lending by a bank, he said investors were more likely to benefit. 

“First home buyers haven’t benefited too much from that drop of the LVR limits at the moment.”

LVR restrictions were removed in April for 12 months in response to the Covid-19 pandemic, after the introduction of the mortgage deferral scheme. 

After calls for LVRs to be re-instated becasue of the hot demand for property, the Reserve Bank announced last week it would re-introduce them on March 1, instead of the original May 1 deadline. 

Goodall said the report collected data from this year and classified first home buyers using Land Information New Zealand documents.