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First home buyer market share sets new record – CoreLogic

Interest rate hikes and turbulent property market conditions through 2023 did little to deter first home buyers (FHB), whose market share hit a new record high at 27% in the final months of the year.

Figures from the CoreLogic January Housing Chart Pack shows FHB activity hit 27% in December and in quarter four overall, taking their total market share for 2023 to 25.8%, well above the previous peak of 23.1% in the 2021 calendar year.

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

Mortgaged multiple property owners (MPOs, including investors) had a quiet 2023 – with only about 14,000 purchases or 21% of activity, both the lowest on record back to 2005.

Relocating owner-occupiers (movers) are also relatively quiet compared to past standards, with just 25% 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.

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

January Housing Chart Pack highlights:

– Residential real estate is worth $1.59 trillion. – National property values rose 1% in December, the third increase a row. The main centres have generally been recording larger increases, with some provincial markets a little softer.

– Sales volumes in December, across both private deals and real estate agents, were about 28% higher than the same month last year, the eighth rise in a row. And on a 12-month total basis, sales have now risen to 66,000, up from the April trough of less than 61,000, but still well below the average of 90-95,000 per year.

– New listings activity has started to rise back again after the holiday period, with 3,146 new listings over the four weeks ending 14 January, well below the 3,815 from the same time last year and the five year average (4,035).

– Total stock on the market is 31,785, 15% below this time last year. – Rental growth is still running at historically high levels, and was 7.0% in the year to December (Stats NZ new tenancy/flow measure) – that remains well above the long term average growth rate of 3.2%, and reflects further growth in wages, as well as a tightening supply and demand balance.

– Gross rental yields nationally have edged back up to 3.2% (from a trough of 2.6% for much of 2022), the highest level since late 2020. However, that’s still relatively low by past standards, and is less than the income returns on some other asset classes (e.g. term deposits).

– Around 55% of NZ’s existing mortgages by value are currently fixed but are due to reprice onto a new (generally higher) mortgage rate over the next 12 months.

– Inflation seems to have passed its peak and the Reserve Bank will wait to see the effects of the final 5.5% OCR for this tightening cycle. Mortgage rates are close to, or already at, their peak.

Download and subscribe to the monthly CoreLogic Housing Chart Pack at corelogic.co.nz/news-research/reports/housing-chart-pack.

 

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