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First-home buyers and investors now neck and neck

Wednesday 17th April 2019

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First home buyers are increasingly making their presence felt in the housing market as buying by investors needing a mortgage remains depressed, according to CoreLogic figures.

The two groups of buyers now match each other in terms of percentage of sales at about 24 percent each nationwide.

That’s up from first-home buyers accounting for just 18 percent of sales in the first quarter of 2014. Buying by investors needing a mortgage has dropped from a peak at 28 percent in the third quarter of 2015.

Investors needing a mortgage continued to account for only slightly smaller percentages of sales until the fourth quarter of 2016 when the Reserve Bank lifted the level of deposit investors needed to 40 percent of a property’s value. That has since been reduced to first 35 percent and now 30 percent.

The imposition of loan-to-valuation restrictions requiring most buyers to have at least a 20 percent deposit kicked in from Oct. 1, 2013 and clearly had a big impact on first home buyers to begin with.

“For a long period of time, investors had a much larger market share,” but the 40 percent deposit requirement dampened their activity from October 2016, CoreLogic economist Kelvin Davidson says.

“First home buyers have slowly and surely kept raising their presence. This is not to say that there is always direct competition between the two groups, or that an investor buying is always locking out a first home buyer or vice versa,” Davidson says.

“But it’s still interesting that their market shares are similar and these may well continue to be the two groups to watch for the rest of 2019.”

Multiple property owners needing a mortgage troughed at 22 percent in the fourth quarter of 2017. Since then, “they’ve slowly crept back into the market on the back of more finance becoming available,” Davidson says.

“Their comeback is despite several new rules from the government which have raised costs,” he says.

They included the ring-fencing of negative gearing losses, requirements for additional insulation and restrictions on foreign buyers.

Davidson says the strong upward trend in first home buyers’ share of the market has flattened in the past three to six months but their share of purchases is still high in an historical context.

“The ability to tap their KiwiSaver funds for a deposit, alongside a willingness to compromise on location/property type, are key factors keeping first home buyers’ share of purchases high,” he says.

CoreLogic figures show that first home buyers are entering many markets around the country at prices 15-20 percent below the area’s average.

The national patterns also apply to the Auckland market.

“What is an interesting aspect of the Auckland market at present is that despite average values being more than $1 million, first home buyers are not just a strong presence, but they’re actually the largest individual buyer group with a 27 percent market share,” he says.

Those moving from one owner-occupied property to another command the largest market share at 27 percent of sales nationwide but are 25 percent of sales in Auckland.

Investors who don’t need a mortgage account for 13 percent of sales nationally and 12 percent in Auckland.


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