First home buyers hit record high 27% market share
Despite stretched affordability, high interest rates, and cost of living pressures, first home buyers (FHBs) in New Zealand continue to lead the market in purchasing activity, highlighting the continued strong appeal of having a ‘foot on the ladder’.
CoreLogic’s six-monthly First Home Buyer Report released today shows FHBs accounted for 27% of purchases in the third quarter, a new record high. Over the year to date, FHBs sit at 26% market share, comfortably above the long-term average of 21%, however the number of deals still sits below past norms in a relatively subdued market.
NZ Chief Property Economist Kelvin Davidson said despite some key challenges for all buyer groups, FHBs are still finding a way.
“Whether it’s using the low-deposit lending speed limits at the banks, tapping their KiwiSaver to help with their deposit, securing First Home Grants or First Home Loans, or compromising on the size or location of their home, FHBs are proving relatively more successful in buying their first home than at any other time,” Mr Davidson said.
The national trends are being reflected across the main centres, with all six areas recording above-average shares of FHB purchases so far in 2023.
Wider Wellington has held the strongest market share for FHBs with 33% of purchases in the year to date (4% above normal). At the other end of the spectrum, FHBs in Tauranga held 21% of purchases (5% above normal). Auckland, Christchurch, and Dunedin each report 5% higher than average, with Hamilton 6% above for 2023.
Provincial markets show a similar trend with Invercargill holding the strongest market share for FHBs with 32% of purchases, a significant 10 percentage points higher than the long-term average. Whangarei and Rotorua are other examples of ‘FHB hotspots’, as are smaller areas such as South Waikato and Clutha.
FHB median price
FHBs have benefitted from the wider downturn in property values over the past 18 months, with the median price paid by the cohort falling from $720,000 in 2022 to $690,000 in 2023 to date.
Mr. Davidson said the typical FHB often enters the market above the ‘bottom rung’, rather than starting from the bottom.
“For example, $690,000 is lower than the median price paid across all buyers at $762,500, but it’s significantly higher than the lower quartile across all buyers at $565,000.”
Auckland is the main centre where FHBs pay the most at a median of $875,000 in 2023, $107,000 less than the all-buyer median of $982,000. Median FHB prices paid range between $700-$750,000 in each of Tauranga, Wellington, and Hamilton, and sit at $600,000 in Christchurch, and $530,000 in Dunedin.
Standalone houses have accounted for 71% of FHB purchases nationally so far in Q3, which is on par with the 2022 figure but less than the 75%-80% share over 2019 and 2020. Flats have increased to 22% of FHB purchases in the year to date, up from 21% last year and 18% across all buyers.
Across the main centres, standalone houses account for the highest shares of FHB purchases in Dunedin (89%), Hamilton (88%), and Tauranga (87%). These figures for the year to date are close to their long-term averages.
Mr Davidson said purchases for houses in Auckland, Christchurch and Wellington over 2023 have been comparatively low compared to past norms.
“Factors that likely contribute to this include better affordability and availability for smaller dwellings like townhouses or apartments in these main centres,” he said.
The main urban areas
Across New Zealand’s main urban areas FHB market share has remained strong in 2023. Invercargill has had the highest market share for FHBs with 32% of purchases in 2023 to date, a full 10 percentage points above the long-term average. Whangarei, Rotorua, Napier, and Hastings each recorded at least 5 percentage points higher than normal.
In contrast, Queenstown has seen FHBs continue to struggle a little in 2023, with a market share of only 13%, down from its long-term average of 15%.
Mr Davidson said that in the main urban areas houses account for a significant portion of FHB purchases given the makeup of housing stock.
“Over 2023 to date, houses have accounted for 93% of FHB purchases in Rotorua, with that figure also topping 90% in Gisborne, Whanganui, Palmerston North, and Invercargill. Figures of 80-90% have been seen in Whangarei, Napier, Hastings, New Plymouth, Kapiti Coast, and Nelson. Queenstown’s figure for houses as a share of FHB purchases fell to 53%, reflecting a wider range of property types and affordability pressures in that market.”
In terms of median prices paid by FHBs so far this year, the highest figure has been in Queenstown at $967,500. Whangarei, Napier, Hastings, Kapiti Coast, and Nelson have all been in the range of $600-$700,000, with lower prices being paid by FHBs in Whanganui ($425,000) and Invercargill ($400,000).
Mr Davidson said it’s been a strong market for FHBs, with many key factors still in their favour.
“It wouldn’t be a surprise to see FHBs continue to hold onto an above-average share of property purchases in the next six to nine months. After all, we do not expect runaway growth in house prices for the foreseeable future, especially if or when caps on debt-to-income ratios for mortgage lending come into force next year. Affordability also remains a handbrake, as do high mortgage rates.”
“However, with the change of government and the slow softening of the tax system for property investors that lies ahead – namely a shorter Brightline Test and the full reinstatement of mortgage interest deductions – FHBs may find some competition returning from this cohort.”
“To be fair, low rental yields and high mortgage rates, hence high ‘top ups’ from other income sources, could prevent a strong return from property investors. But this FHB Report probably still marks a line in the sand, and FHBs may start to see some competing buyers returning.”
To download the report, visit corelogic.co.nz/news-research.