The share of residential property purchased by first home buyers and investors was solid again in August, albeit the overall volume of market activity is still relatively low. There are signs, however, of a pick-up in credit flows, which could signal an improvement in transactions in the coming months.

Another month on, and the latest CoreLogic buyer classification data for August has delivered us a fuller picture of how the September quarter as a whole may turn out. So what’s been going on in the data?

As the first chart shows, August saw another increase in the proportion of residential property purchases going to first home buyers (FHBs), from 23% in July to 24%. The latest figure matches the previous peaks prior to the

Graph 1
% of property purchases (Source: CoreLogic)

GFC in 2006-07. Despite the drop in housing affordability over the years, FHBs are clearly still finding a way into the market, helped along by amongst other things the ability to access their Kiwisaver funds for a deposit, or part of it at least. KiwiBuild will mean that FHBs’ share of purchases may stay elevated in future.

Graph 2
% of purchases by mortgaged MPOs (Source: CoreLogic)

The other key point of interest is that mortgaged multiple property owners (MPOs) have held their ground in the past couple of months, sitting at 24% in August. MPOs with a mortgage are a decent presence in the market across all of the main centres, but especially in Auckland and Hamilton (see the second chart). This group has pulled back a bit in Tauranga over the past year or so, but has stepped up quite sharply in Dunedin. Dunedin has reasonably high gross rental yields (4.1%) which may be proving attractive to some investors.

Graph 3
Annual change ($m) in gross new lending (Source: Reserve Bank of New Zealand)

Credit flows to investors (as well as owner-occupiers) are also improving slowly, with the $1.33bn of new lending in July up by about $270m from a year ago, as shown in the third chart. It’s often hard to know whether an increase in credit flows have been driven predominantly by borrower demand or by lender supply (or both), but whatever the cause, more finance will be underpinning MPOs’ higher market share. And with the investor speed limit not even close to being in play at the moment (new lending with LVR > 65% was less than 1% of the total in July, against the speed limit of 5%), there’s probably scope for those credit flows to continue to edge upwards.

Graph 4
Property sales (July years, Source: CoreLogic)

Overall, our latest figures show that, despite low affordability, FHBs are still getting into the market. And despite extra regulatory requirements to meet, investors are starting to come back too. It’s important to note that the buyer classification figures here are showing the % share of the market for the different groups, rather than their number of purchases. And as the fourth chart shows, we’re currently in a relatively quiet overall market in terms of activity. But as we head through spring and into summer, the tentative signs that the lending purse strings are starting to loosen will be a welcome development across the buyer groups.