The market share of first-time home buyers has reached an all-time high

PHOTO: FILE

In New Zealand, first-time home buyers (FHBs) continue to dominate the real estate market despite facing challenges such as affordability strains, high interest rates, and the increasing cost of living. This underscores the enduring appeal of getting a foothold on the property ladder.

According to CoreLogic’s latest First Home Buyer Report, FHBs accounted for a record-high 27% of property purchases in the third quarter. Throughout the year, FHBs have maintained a 26% market share, comfortably surpassing the long-term average of 21%. However, the number of transactions remains somewhat subdued in the current market conditions.

Kelvin Davidson, the Chief Property Economist for New Zealand, explained that FHBs are finding ways to enter the market despite the challenges they face. They are using various strategies such as leveraging low-deposit lending speed limits at banks, utilizing their KiwiSaver funds for down payments, and accessing First Home Grants or First Home Loans. Some are also making compromises on the size or location of their first home, making them relatively more successful in achieving homeownership than in the past.

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The trend of FHB dominance is not limited to specific areas; it is observed across New Zealand’s main urban centers. In 2023, the FHB market share in Wider Wellington is particularly strong, with 33% of purchases, which is 4% higher than the norm. Meanwhile, Tauranga has seen 21% of purchases by FHBs, exceeding the average by 5%. Auckland, Christchurch, Dunedin, and Hamilton each report 5% higher than the average for FHB purchases.

The same trend is evident in provincial markets, with Invercargill leading the way at 32% of purchases, a substantial 10% above the long-term average. Other FHB hotspots include Whangarei, Rotorua, South Waikato, Clutha, and smaller regions across the country.

FHBs have benefited from the recent decline in property values, with the median price they pay dropping from $720,000 in 2022 to $690,000 in 2023. However, it’s important to note that this median price is still higher than the lower quartile for all buyers, indicating that FHBs often enter the market slightly above the bottom rung.

In terms of property types, standalone houses continue to be the most popular choice for FHBs, making up 71% of their purchases in the third quarter. This figure is similar to 2022 but slightly lower than the 75%-80% share observed in 2019 and 2020. Flats have increased to 22% of FHB purchases this year, up from 21% last year.

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Looking at the outlook for FHBs, Mr. Davidson believes that they will likely maintain an above-average share of property purchases in the next six to nine months. This is due to the expectation of stable or slow house price growth, especially if regulations like debt-to-income ratios for mortgage lending come into effect. Affordability concerns and high mortgage rates may also act as a brake on rapid property price increases.

However, changes in government policies, such as a shorter Brightline Test and the full reinstatement of mortgage interest deductions, could reintroduce competition from property investors. Nevertheless, FHBs have made a strong mark in the current real estate landscape, and they may continue to see increased interest from competing buyers in the near future.