The country’s first home buyers (FHBs) are taking full advantage of lower property prices, the availability of low-deposit finance, opportunities to tap into KiwiSaver funds, and reduced competition from other buyers.
CoreLogic’s biannual First Home Buyer Report released today shows FHBs accounted for 26% of purchases in Q1 of 2024, well above the long-term average of 21%.
The report, based on the CoreLogic Buyer Classification series, provides in-depth insights into FHB activity across New Zealand, the types of properties being purchased and prices they're paying.
NZ Chief Property Economist Kelvin Davidson said since the previous edition of the First Home Buyer Report was published in November 2023 there have been two ‘mini-phases’ in the housing market recovery.
“There was a small burst of price growth at the tail end of 2023, but more listings became available over the first few months of 2024, which has contributed to a slowdown in property values, as conditions swing back in favour of buyers,” he said.
“Throughout all of these market changes, one constant factor in recent months has been the continued strong presence of first home buyers.”
As FHBs navigate tricky lending conditions and high mortgage rates, Mr Davidson said they were taking advantage of the low-deposit lending allowances at the banks, using FHB grants and loans, and in some cases compromising on location and/or property type.
FHB median price - more bang for buck
FHBs are paying less for more in 2024, with the median price falling to $695,000 in Q1 2024 from $699,000 last year, and $715,500 in 2022.
That’s despite standalone houses, bigger properties, representing a higher share of FHB purchases this year, which essentially signals that FHBs are getting ‘good deals’ in the current conditions,” Mr Davidson said.
He also pointed out the median FHB price might be lower than the market more broadly, however they’re often not buying the cheapest properties.
“The price being paid by FHBs is significantly higher than the lower quartile, or bottom 25%, of all buyers, where the median price is $565,000,” Mr Davidson said.
“It shows that the ‘typical’ FHB doesn’t 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.”
FHB trends around the country
The national trends can also be seen at a more granular level with data across Auckland, Hamilton, Tauranga, wider Wellington, Christchurch, and Dunedin recording FHB activity above long-term averages.
FHBs made more than one in three purchases (36%) in wider Wellington in Q1 compared to 22% in Tauranga. In Hamilton, FHB activity is 34% and well above its long-term average of 24%. Even in Tauranga, though, recent activity has still been well above average (16%).
Mr Davidson said this above-average trend is consistent across all main urban centres despite there being a significant gap between the cost of a mortgage and rents.
“With mortgage rates having risen sharply, and even despite a recent acceleration in rental growth too, the extra cost to pay the mortgage compared to rent is still quite high,” he said.
“With rent being significantly cheaper it certainly highlights that most FHBs are likely to be purchasing for reasons such as stability of tenure rather than due to simple financial drivers.”
FHBs are also highly active in NZ’s next 12 key centres, nabbing significant market share in many areas in 2024.
In Q1, the highest proportions of FHBs were recorded in Rotorua, representing 32% of all buyers, while Palmerston North and Invercargill each saw FHBs comprising 31% of buyers. These figures exceed Rotorua and Invercargill’s long-term averages by 9% and 8%, respectively.
Mr Davidson said while it’s difficult to determine someone’s motive to purchase in a certain area, it’s likely affordability and lifestyle are key contributors for the surge in FHB activity in many urban areas.
FHB outlook
Mr Davidson expects above average FHB activity will continue this year and possibly into 2025 as well, particularly given other buyer groups, such as investors, are still facing challenges.
Although the number of FHB transactions over the past 12 months was not a record high at around 18,200, he said it was close to the long-term annual average of around 19,200.
“It’s never easy to buy that first property, but FHBs have remained consistently active since late 2022 and many of the key factors that prompted them to act then remain in place today,” he said.
“Of course, there’s never any guarantee, and FHBs might not have things all their own way, given that 80% interest deductions are back, the CCCFA and LVR rules are set to loosen, and that there’ll be a shorter Brightline Test from 1st July.”
Download the First Home Buyer Report
CoreLogic New Zealand