First-home buyers make a record share of property purchases

First-home buyer (FHB) activity has jumped in New Zealand, with new data showing the cohort now make 27 per cent of home purchases.

According to CoreLogic’s January Housing Chart Pack, FHB’s portion of purchases hit a record high of 27 per cent in December, taking their total market share for 2023 to 25.8 per cent –  well above the previous peak of 23.1 per cent in 2021.

CoreLogic NZ Chief Property Economist Kelvin Davidson said FHBs may have been the biggest property market success story of 2023.

“This is the first time FHBs have ever out bought other buyer groups,” Mr Davidson said.

“There are a number of reasons for their relative resilience, but key factors include access to KiwiSaver to boost the deposit, a willingness to compromise on location or property type, the ability to tap the low deposit lending speed limits at the banks, and less competition from other buyer groups.”

Mr Davidson said despite hitting a record share of purchases, the number of purchases has been higher in the past, but relative to other buyers they are still showing some strength.

He said FHBs accounted for about 17,000 property purchases in 2023, up from 14,500 purchases in 2022.

Source: CoreLogic’s January Housing Chart Pack

While FHBs remain active, investors are still sitting on the sidelines.

According to Mr Davidson, mortgaged multiple property owners (MPOs, including investors) had a quiet 2023, with only about 14,000 purchases or 21 per cent of activity.

This was the lowest number since records began in 2005.

Relocating owner-occupiers (movers) are also relatively quiet compared to past standards, with just 25 per cent of activity over the fourth quarter of 2023. 

Mr Davidson said with loan-to-value ratio restrictions still biting, gross rental yields low, mortgage rates high, and the interest deductibility rules still against them, it’s not too surprising that investors’ purchasing activity has softened. 

“That said, their market share has just started to edge higher in the past month or two, so they’re definitely a buyer group to watch as the market enters a new cycle,” he said.

According to CoreLogic, national property values rose 1 per cent in December, the third increase in a row. 

Sales volumes in December were also higher, up 28 per cent compared to the same month last year, and marking the eighth rise in a row. 

On a 12-month total basis, sales have risen to 66,000, up from the April trough of less than 61,000, but still well below the average of 90,000 to 95,000 per year. 

New listings activity has started to rise again after the holiday period, with 3146 new listings over the four weeks ending 14 January, below the 3815 from the same time last year and the five-year average (4035).

However, total stock on the market is 31,785, which is 15 per cent below this time last year and showing the supply is still tight.

While rental growth is still running at historically high levels at 7 per cent annually which is well above the long-term average growth rate of 3.2 per cent.

Mr Davidson said he expected market conditions to improve in the year ahead, but tipped growth would be slow.

“Looking ahead, the overall property recovery is set to continue in 2024, but could be a little underwhelming, given still-high mortgage rates and the prospect of caps on debt-to-income ratios later in the year,” he said.

“As property tax changes kick in with deductibility restored to 80 per cent from 1st April, it will be interesting to see how investors’ demand responds.”

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Rowan Crosby

Rowan Crosby is a senior journalist at Elite Agent specialising in finance and real estate.