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First Home Buyers dominate Mortgage market

Property Institute of New Zealand Chief Executive Ashley Church says that new figures showing that First Home Buyers have taken out more housing mortgages, with Banks, than any other buyer group in New Zealand over the past five years may mean that current housing policy is flawed.

His comments are supported by the results of a joint report, released by the Property Institute and data company Valocity, which measures ‘mortgage registrations’ (the number of mortgages uplifted according to the different classifications that buyers identify with when they buy a property) which shows that First Home Buyers have dominated the number of new mortgages uplifted in each of the past 5 years in every part of the country except Auckland.

“It’s fair to say that these results came as a shock. Every Commentator, in recent years, has been concerned about the impact of house price inflation, on first home buyers – so the discovery that they’ve been the largest group of buyers in the market is something of a bombshell”.

Mr Church notes that the figures don’t include properties which were bought without the need of a mortgage or properties which were purchased by foreign investors who sourced their mortgage funds offshore but he says that it’s unlikely that these numbers would change the overall picture significantly.

“Unless you buy into the now thoroughly discredited claim that foreign buyers made up over 30% of the market – these additional purchases would be on the fringes and are likely to confirm the overall trend”.

Mr Church says that this new information may lead to a review of current policies designed to support First Home Buyers.

“Both National and Labour have been fixated on addressing the situation facing first home buyers in order to help more of them get into the market – but these figures suggest that this may not be the problem we all believed it to be. If that’s the case, then maybe programs like KiwiBuild need to be targeted more broadly and with a focus on making those homes available to those in the greatest need rather than only those who are buying their first home”.

Mr Church says that the figures also provide a clear picture of the market, in general, over the past 5 years and demonstrate that the property market peaked in 2016.

“Almost without exception – the number of mortgages uplifted by every buyer group peaked in 2016 and has dropped away since then. That’s the clearest indication, yet, of when we reached the top of the market”.

Mr Church says that, for those who follow New Zealand property cycles, this information allows us to predict where the market will go over the next 10 to 12 years with some degree of accuracy.

“We know from experience that property values roughly double in Auckland every 10 to 12 years and, based on this ‘rule of thumb’ I’m of the view that the next cycle will start in 2021/2022 and that, by 2026 or 2027 the median house price, in Auckland, could be around twice what it is now”.

According to the Valocity data:

• The total number of mortgages uplifted in a 12 month period peaked at 164,000 in the year to March 2016 and had dropped to 121,000 in the year to March 2018. This means that the total number of new mortgages in the year to March 2018 has dropped by 26% off the March 2016 peak.

• In the year to March 2016, First Home Buyers uplifted 40,000 mortgages, nationwide, making them the largest group of new mortgage customers representing 24% of all mortgages. By the year to March 2018 that number had dropped to 32,000 mortgages nationwide – although their share of total new mortgage business actually increased to 27%

• Auckland bucked the national trend – with 18,000 mortgages (or 29% of the total) being for the purpose of refinancing in the year to March 2016. That figure had dropped to 12,000 mortgages by the year to March 2018 – but this lower number still represented 29% of all mortgages.

• 33% of properties, nationwide, are mortgage free – a figure which has remained largely unchanged over the past 5 years.

• Investors have never represented the largest group of new mortgage customers over the past 5 years. In the year to March 2016 they uplifted 29,000 new mortgages representing 18% of all new mortgage business. By the year to March 2018 they had uplifted 19,000 new mortgages or just 16% of all new mortgage business.

The report is available here

Property Institute Valocity Regional Insights Report

Meanwhile – the New Zealand housing market continues to maintain a holding pattern according to the latest results of the Property Institute Valocity Regional Insight Report.

According to the Report, the median sales price across New Zealand has dropped 2.7% to $492k over the past 12 months - even though sales volumes, nationwide, have dropped by 31% since April 2017.

“As predicted, there’s no ‘correction’. Kiwis are just continuing their orderly retreat from the market while they wait to see what happens next”.

Mr Church also notes that, according to Valocity data, first home buyers are still accounting for around 29% of all new mortgages across the country – well ahead of other borrowers. He also notes that mortgages to Investors have remained steady at about 17% of all new mortgages.

The PRINZ Regional Insights Report is available here


• Auckland median sales prices have dropped by 3.2% year on year

• Nationwide – the median sale price remains soft, down 2.7% year on year

• Nationally, First Home buyers continue to account for a significantly larger proportion of mortgage registrations than other buyer types


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