Despite tough market conditions and rapidly rising house prices, first home buyers in New Zealand have hit record high market share.
CoreLogic’s bi-annual First Home Buyer Report, revealed 26.4 per cent of all buyers in the three months to 30 September bought a property for the first time. That’s about 5700 transactions.
During the same three-month period CoreLogic‘s House Price Index revealed New Zealand’s average property value increased 4.8 per cent to $950,229, up 27.8 per cent for the 12 months to the end of September. Values rose a further 2.1 per cent in October.
CoreLogic NZ Chief Property Economist Kelvin Davidson said the proportion of FHBs in the market between July and September 2021 was well above the long-term average of 21.8 per cent and surpassed the previous benchmark of 25.6 per cent, set in the third quarter of 2020.
“We have to acknowledge that the underlying number of transactions has been disrupted by COVID and the lockdowns over August/September, so we need to take a little extra care when interpreting market share figures,” Mr Davidson said.
“However, it’s safe to say FHBs are very active in the market.
“The number of deals they were involved with in Q3 was the highest for the third quarter of any year since 2015, except for the same period last year, when we saw the figures ‘artificially’ pushed up due to the post-lockdown bounce.”
Despite the widespread boom in house price growth and associated larger deposits, Mr Davidson said the share of purchases being made by FHBs had been unexpectedly strong in the past few months.
“One of the biggest barriers to home ownership is saving a deposit and in the past year it’s become progressively harder for aspiring FHBs to get those funds together,” Mr Davidson said.
“The average time to save a deposit is now more than 10.5 years, up from less than nine a year ago, and well above the long-term average of around eight years.
“Buying with a deposit that’s less than the standard 20 per cent has previously been popular among FHBs.
“However, since the banks’ allowance for advancing low deposit loans to owner occupiers recently halved from 20 per cent of lending flows to 10 per cent that is no longer an option for many.”
National trends replicated across New Zealand
The national trends have been replicated across Auckland, Hamilton, Tauranga, wider Wellington, Christchurch, and Dunedin, as FHBs’ market share in the quarter registered above long-term averages by at least two percentage points.
Wellington recorded the highest share of FHB activity at 33 per cent in Q3 2021, compared to the city’s long-term average of 29 per cent. Dunedin recorded the most significant growth, registering an FHB market share figure of 30 per cent, eight percentage points above its average of 22 per cent.
FHBs paying less than the rest of the market
First time property owners are paying slightly less than the rest of the market, notably in the country’s most expensive city, Auckland, where FHBs paid a median price of $900,500 in Q3 2021.
The figure is $149,500 less than the median price being paid by all buyers ($1,050,000) in Auckland.
The gap was also more than $100,000 in Tauranga, where FHBs paid a median price of $760,000 compared to Wellington, where $800,000 was the median price paid to get into the market.
FHBs in Christchurch paid a median price in excess of $500,000, but the figure remains lower than Dunedin, where the median price paid during the quarter was $566,125.
The most expensive FHB market across NZ’s main urban areas was Queenstown, where a median price of $860,000 was paid by FHBs, followed by Kapiti Coast at $777,500 and Palmerston North, Whangarei, Napier, and Nelson where FHBs paid more than $600,000.
Amongst the main urban areas, Invercargill was the country’s lowest priced FHB market, with a median of $382,000 in Q3 2021.
NZ FHBs prefer freestanding houses
Freestanding houses accounted for 72 per cent of FHB purchases in Q3 2021, down sharply from the full-year figure of 78 per cent in 2020, as affordability constraints forced buyers to consider flats.
The percentage of flats – defined as townhouses and other shared wall properties – purchased by FHBs was 18 per cent, up from 14 per cent last year.
Mr Davidson said FHBs were taking the opportunity to get into the market, capitalising on strong financial incentives to buy rather than rent, filling the gap left by a decline in mortgaged investors’ market share who faced tougher conditions due to tighter lending restrictions.
“It will be interesting to see if the FHB market share can hold up at similar levels in the coming quarters, given that the low deposit lending speed limit is now much tighter,” he said.
Visit corelogic.co.nz to download a free copy of the Q3 2021 First Home Buyer Report.