First home buyers remain main stakeholders


First home buyers leave a mark on the market (INL Stock Image)

Praneeta Mahajan
Hamilton, January 17, 2024

Over the year to date, First Home Buyers have remained a key presence in the property market, accounting for around 26% of purchases, comfortably above the long-term average of 21%.

A recent report by ‘CoreLogic’ has highlighted that in the third quarter of 2023 itself, their market share was pushing 27%, a new record high, although it must also be noted that the number of deals is still below past norms.

Stretched housing affordability and high mortgage rates remain key challenges at the start of 2024, but many first-home buyers are still proving successful, by using the low-deposit lending speed limits at the banks, tapping their KiwiSaver for a deposit (or part of it), securing First Home Grants or First Home Loans, and also a willingness to compromise on location or property type.

The report states, “The allure of ‘a foot on the ladder’ clearly remains strong. Meanwhile, given the wider downturn in property values over the past 18 months or so, the median price being paid by first home buyers has also come down, from $720,000 in 2022 to $690,000 in 2023 to date. And that is despite (more expensive) standalone houses maintaining a steady share of all first home buyer purchases, at 71% so far this year, the same as in 2022.”

Property types

Looking at the other property types, flats have been 22% of FHB purchases so far this year, versus 21% last year, and 18% across all buyers. But first home buyers have picked up relatively fewer apartments and lifestyle properties than all buyers,  3% vs 5%, and 2% vs 6% respectively.

Looking at the other property types, flats have been 22% of first-home buyer purchases so far for the financial year 2023-24, versus 21% last year, and 18% across all buyers. But FHBs pick up relatively fewer apartments and lifestyle properties than all buyers – 3% versus 5%, and 2% versus 6% respectively.

The report further highlights, “Another important point to make about the prices being paid by first home buyers is that the median for this group ($690,000 in 2023) is lower than all buyers ($762,500), but significantly higher than the lower quartile (bottom 25%) across all buyers, of $565,000.”

In other words, the ‘typical’ first home buyers do not always enter at the bottom of the market and work their way up. Many actually enter the market well above the ‘bottom rung’ of the ladder.

National trend in numbers

Looking at the data across Auckland, Hamilton, Tauranga, wider Wellington (i.e. combined City, Lower Hutt, Upper Hutt, Porirua), Christchurch, and Dunedin, the national trends can also be seen at the more granular level, and, all of these areas have had first home buyers’ market shares lately have been above their averages.

Median first-home buyers’ prices have paid have also fallen. A similar message applies in ‘provincial’ markets too, with areas such as Invercargill, Whangarei, Rotorua, Napier, and Hastings all seeing above-average shares of first-home buyer purchases so far in 2023.

Hotspots for First home buyers

South Waikato, Clutha, Tararua, Timaru, Selwyn, and Manawatu all join that list of ‘first home buyer hotspots’ as well. Overall, then, it has remained a strong market lately for first home buyers, with many key factors still in their favour.

The way ahead

Corelogic spokesperson said, “Looking ahead, it would not be a surprise to see first-home buyers continue to hold onto an above-average share of property purchases in the next six to nine months as well. After all, we do not expect runaway growth in house prices for the foreseeable future, especially if and when caps on debt-to-income ratios for mortgage lending come into force next year.”

“However, with the change of government and the slow softening of the tax system for property investors that lies ahead, namely, a shorter Brightline Test and the full reinstatement of mortgage interest deductions.”

First-home buyers may not have things all their way forever with investors ready to come back to the market, bringing some extra competition for first-home buyers.

Talking about the real estate market trend, Arjun Mahajan, a real estate salesperson from Harcourts, Hamilton said, “First home buyers have definitely left their mark and moved with great amount of confidence throughout the year of 2023. The market movement is now being watched closely by property investors and with changes expected in the interest rates in the coming months, it will be interesting to see the market speed up. The house prices are already moving upward, showing a higher level of confidence, from both first home buyers as well as investors.”

Praneeta Mahajan is an Indian Newslink reporter based in Hamilton.

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