First-time home buyers finally find relief in New Zealand’s market
FOR years, Louie Hancock struggled to buy a home in New Zealand as pandemic-era low interest rates pushed prices out of reach and banks tightened lending.
This year, all that changed. Mortgage rates have fallen to the lowest in more than three and a half years and property values have hovered around 17 per cent below their 2022 peak.
In June, at the age of 40, Hancock and her partner Jack Teppett, bought a home in Titahi Bay, a beach-side suburb north of the capital city Wellington.
They’re part of a growing group of first-time homebuyers benefiting from New Zealand’s almost four-year housing downturn that’s made homes more affordable.
People signing up to buy their first property in New Zealand made up a record 27.7 per cent of all transactions in the third quarter, according to the Cotality-Westpac NZ First Home Buyer Report published on Wednesday. In Wellington, the share was even higher at 36 per cent. First-time buyers in the US over the past year accounted for just 21 per cent of the market.
“I’m still surprised that we managed to do it, to be honest,” Hancock, who works for a labour union, said. “It’s something that I’ve wanted, but I just hadn’t felt it was realistic or within reach.”
Kelvin Davidson, chief property economist at Cotality in Wellington, said first-home buyers are faring well in an environment where house prices and mortgage rates have both fallen.
The Reserve Bank of New Zealand has cut its key rate by 300 basis points to 2.5 per cent since it began easing in August last year, and is tipped to reduce it again later this month.
House prices were at a two-year low in August and are little changed since, according to Cotality. A one-year fixed mortgage is the cheapest since March 2022, RBNZ data show.
Buyer’s market
Westpac lending to first-home buyers is the highest in more than three years and cheaper loans have made a significant difference, said Satish Ranchhod, senior economist at Westpac in Auckland. One-year borrowing costs have fallen 150 basis points in the past 12 months, while two-year rates are 250 points lower, he said.
“Those are big declines, and they’ve made the housing market a lot more accessible for would-be first-home buyers,” he said. “Lower interest rates mean some first-home buyers won’t need to raise as much equity, given that the same cash outflow will now service a larger loan.”
Hancock and Teppett, who bought their three-bedroom home for NZ$741,000 (S$543,830), pay around NZ$60 a week more for the mortgage than they used to pay in rent.
Real estate consultant Alison Hawkes said it’s firmly a buyer’s markets, with first-timers possessing a degree of poise and calculation that was absent during the frenzied Covid-boom years when New Zealand had one of the world’s hottest property markets.
“They’ve done their homework,” she said of first-time buyers. “They know how much they want to spend, regardless of what they can borrow. They’re sticking to their budgets and are willing to walk away if the price doesn’t match.”
David Cunningham, chief executive officer of mortgage adviser Squirrel, said there is also a high level of houses for sale, which was contributing to first-time buyers having the luxury of being choosy.
“It’s the perfect time for first-time buyers - and we’re building more houses than the population growth as well,” he said. “You can get brand new houses at good prices.”
Still, the average age of a first-home buyer in New Zealand has edged higher to 36 years, the report said. By comparison, the median age of first-time homebuyers in the US has climbed to a record of 40. BLOOMBERG
Decoding Asia newsletter: your guide to navigating Asia in a new global order. Delivered to your inbox. Free.
Share with us your feedback on BT's products and services
