PHOTO: First home buyers. GETTY
The General Election results are expected to have a significant impact on investors, while first home buyers (FHBs) continue to be the driving force in the housing market, representing nearly 28% of property purchases in September, marking a record high.
According to the latest report from CoreLogic NZ’s Monthly Housing Chart Pack, released today, residential sales have seen a consistent uptick over the past five months, with September’s figures showing an 8% increase compared to the previous year.
First home buyers are dominating the market in most major centers, with both Auckland and Christchurch accounting for 29% of property purchases each. CoreLogic NZ’s Chief Property Economist, Kelvin Davidson, attributes this trend to lower house prices, reduced competition from other buyer groups, and support from financing incentives, such as LVR low-deposit allowances. However, he notes that this dynamic may undergo some changes following recent government policy adjustments.
In contrast, relocating owner-occupiers (“movers”) and mortgaged multiple property owners (MPOs) have been relatively inactive, accounting for 26% and 21% of purchases during the third quarter of 2023, respectively. Davidson anticipates a potential resurgence of activity among these groups as “property-friendly” policies are gradually introduced by the new government, although he doesn’t expect it to significantly alter the subdued market recovery that has been taking place.
Investors may feel more encouraged, but they are unlikely to flood the market due to the 35% required deposit, low rental yields, and high mortgage rates. Consequently, they will still need to supplement their property purchases with additional income from other sources.
READ THE FULL REPORT HERE: 2310-CoreLogicNZ-HousingChartPack-Oct2023
The national average property values reached a bottom in September, following around 18 months of decline. Davidson points out that one reason for this stabilization is the listings situation. New listings for the four weeks ending on October 8th numbered 7,316, representing a 15% decrease compared to the same period last year and the five-year average. Nevertheless, they are on the rise for the spring season.
This low influx of new listings, combined with increasing sales volumes, has led to a decrease in the overall stock of listings on the market. This could result in more competition for buyers who have secured their finances and a boost in demand as people gain confidence that property prices have stopped falling. However, Mr. Davidson emphasizes that the persistence of “higher for longer” mortgage rates remains a significant challenge.
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Highlights from the October Housing Chart Pack include:
- The total worth of residential real estate in New Zealand is $1.58 trillion.
- National property values in September remained largely stable, with some areas experiencing slight declines and others modest growth, particularly in Auckland and Wellington.
- Property sales in September were 8% higher than the previous year, marking the fifth consecutive monthly increase.
- New listings for the four weeks ending on October 8th numbered 7,316, down from 8,597 during the same period the previous year.
- Total stock on the market currently stands at 31,242, which is approximately 15% lower than the same period last year.
- First home buyers continue to hold a strong market share of nearly 28%, with Auckland and Christchurch both at 29%.
- National rental growth exceeded 7% in September, reflecting higher wages, increased migration to New Zealand, and a tightening supply and demand balance.
- Gross rental yields across the nation have risen to 3.2%, the highest level since late 2020, up from a low of 2.6% observed in much of 2022.
- About 54% of existing mortgages in New Zealand, by value, are currently on fixed rates and are expected to reprice at generally higher mortgage rates over the next 12 months.
- Inflation appears to have peaked, and the Reserve Bank is closely monitoring the effects of the 5.5% OCR for this tightening cycle, with mortgage rates already at, or near, their peak.
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