Market conditions right for first-home buyers to jump in, commentators say

First-home buyers: Now’s your time to jump in.

A combination of more relaxed lending rules and new regulation of the rental property market have created an environment where it’s easier than it has been for years to buy a first house.

Homes.co.nz data shows there have been 1508 sales of houses in Auckland for less than $690,000 in the past year.

That figure is used to indicate a first-home buyer budget because it is the level at which three-quarters of houses for sale are more expensive.

In Hamilton, almost 500 houses and 231 apartments sold for less than the city’s first-home buyer price of $459,000 in the year.

In Christchurch, almost 1000 houses sold in the first-home buyer price range.

Chief data scientist Tom Lintern said Auckland first-home buyers were primarily looking at apartments in the central city or houses in the south and west.

In Wellington, buyers were snapping up apartments in Te Aro and the central city. There, 129 houses and 586 apartments had sold in the bottom price quartile in the last year.

Capital first-home buyers were also buying in Lower Hutt, where they are almost 40 per cent of the market.

CoreLogic data showed first-home buyers were an equal portion of the market to property investors with mortgages in the first quarter of this year. Historically, investors had been a much bigger part.

They accounted for 24 per cent of all purchases. In Auckland, they were the largest buyer group, with 27 per cent of the market.

Head of research Nick Goodall said there was a trend around New Zealand for more first-home buyers to enter the property market.

In Auckland in particular, prices had stalled so there was more chance for people to accumulate a deposit. Buyers in many regions were more willing to compromise on the type of property they bought and the area, to get into the market.

Goodall noted that more low-deposit lending was being done to first-home buyers since the banks’ loan-to-value restrictions were tweaked earlier this year.

In March 2017, $819 million of new loans went to first-home buyers but this March that had risen to $999m.

First-home buyers received $402m of a total $595m lent to borrowers with equity of less than 20 per cent.

Infometrics economist Brad Olsen said conditions were better than they had been in the past few years.

“That’s not to say it’s now easy to buy your first house (far from it), but it is easier than it would have been a year ago,” he said.

“House prices in Auckland, our largest property market, continue to fall even as incomes across the country increase. However, the most important recent change to first-home buyers has been the continuing decrease in fixed mortgage rates. Fixed mortgage rates have been driven lower in recent months by lower long term bond rates, and have made the cost of buying a house and servicing a mortgage more manageable,” he said.

There was also less competition, he said.

“Both first-home buyers and investors have been subdued in the property market recently with the risk of a capital gains tax hanging over them.

“The Government’s ruling out of a capital gains tax (CGT) has now taken this restraint away, making it a less risky choice for first-home buyers to invest.

“At the same time, investors still need to grapple with the increased costs that are coming from the Healthy Homes standards, and the ringfencing of losses. Add to the this the removal of foreign investors, and the dial has certainly shifted towards first-home buyers, especially with looser loan-to-value restrictions since the start of the year.”

Lintern said it would be welcome news for people thinking about buying.

“The cooling house market is good news for first-home buyers. With low interest rates, and increasing restrictions on investors and foreign buyers, it is as good a time as any for first home buyers to get into the market.”

– Stuff

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