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NZMBA says first home buyers pushed out of market

Baby boomers and immigrants push first home buyers out of the property market

The relative save-haven of New Zealand and baby-boomers’ desire for the safety of a house investment, is pushing property ownership out of reach of many first home buyers, mortgage brokers said today.

The major contributor to inflation in New Zealand over the last 12 months has been the 6.9 percent increase in the price of purchasing or building a dwelling.

Statistics New Zealand’s latest consumer price (CPI) figures released yesterday showed the CPI index increased by 0.5 percent in the September quarter. Today the New Zealand Mortgage Brokers Association (NZMBA) is worried for first home buyers.

``The market is not necessarily that over-heated,’’ NZMBA chairman Brian Berry said today.

``A large proportion of the recent price increases have merely been a catch-up to the long term trend line.

``But buyers must be mindful that an investment in property must be viewed as a long term investment and they must be prepared to ride-out the lows of the property cycles which inevitably occur,’’ Mr Berry said.

Earlier this week Reserve Bank Governor Alan Bollard said New Zealand households had unknowingly become risky investors during the period of low interest rates.

Dr Bollard told the Auckland Club the Reserve Bank was concerned about overstretched households, the financial system and the country’s economy. New Zealand is experiencing a housing surge with many owners able to borrow money cheaply for investment properties.

Mr Berry said today the NZMBA was concerned about the volume of sections and property in the pipeline. Spec builders had to be careful to anticipate either a reduction in demand or an oversupply of property in perhaps 12 months, when a lot of subdivisions come on stream, he said.

``We think lenders are being prudent funding investment property for the baby boomers.

``Their lending criteria remains very much cash flow driven. It anticipates the costs associated with owning an investment property and potential interest rate increases.

``We recommend a long-term debt reduction strategy, rather than financing on an interest-only basis.’’

The size of the NZ mortgage market is around $70 billion in total. Mortgage brokers account for approximately $6 billion – or about 28 percent of loans. The NZMBA has more than 575 members.

Copyright 2003 Word of Mouth Media NZ

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