New Zealand first home buyers (FHBs) have hit record high market share over the third quarter of 2021, despite tough market conditions and rapidly rising house prices.

CoreLogic’s bi-annual First Home Buyer Report, released today, reveals 26.4% of all buyers in the three months to 30 September, 2021 bought a property for the first time, completing about 5,700 transactions.

During the same three-month period CoreLogic’s House Price Index revealed New Zealand’s average property value increased 4.8% to $950,229, up 27.8% for the 12 months to the end of September. Values rose a further 2.1% in October. 

CoreLogic NZ Chief Property Economist Kelvin Davidson said the proportion of FHBs in the market between July and September 2021 was well above the long-term average of 21.8% and surpassed the previous benchmark of 25.6% set in the third quarter of 2020.

“We have to acknowledge that the underlying number of transactions has been disrupted by COVID and the lockdowns over August/September, so we need to take a little extra care when interpreting market share figures,” he said.

“However, it’s safe to say FHBs are very active in the market. The number of deals they were involved with in Q3 was the highest for the third quarter of any year since 2015, except for the same period last year, when we saw the figures ‘artificially’ pushed up due to the post-lockdown bounce.”

Despite the widespread boom in house price growth and associated larger deposits, Mr Davidson said the share of purchases being made by FHBs has been unexpectedly strong in the past few months.

“One of the biggest barriers to home ownership is saving a deposit and in the past year it’s become progressively harder for aspiring FHBs to get those funds together,” Mr Davidson said.

“The average time to save a deposit is now more than 10.5 years, up from less than nine a year ago, and well above the long-term average of around eight years. Buying with a deposit that’s less than the standard 20% has previously been popular among FHBs. However since the banks’ allowance for advancing low deposit loans to owner occupiers recently halved from 20% of lending flows to 10% that is no longer an option for many.” 

KiwiSaver, which is being utilised for a home deposit, has been a key source of support for buyers Mr Davidson said, while the trend among FHBs to compromise either on the type of property and/or location is gaining momentum. 

Based on the CoreLogic Buyer Classification series, the Q3 2021 First Home Buyer Report analyses FHB activity in each part of the country. The report includes details on locations, prices paid and what types of properties FHBs purchased in the three months to September 30, 2021. 

FHBs are defined as having never previously owned property in New Zealand before and a mortgage has been secured against the property to complete the transaction.

The national trends have been replicated across Auckland, Hamilton, Tauranga, wider Wellington, Christchurch, and Dunedin, as FHBs’ market share in the quarter registered above long-term averages by at least two percentage points. 

Wellington recorded the highest share of FHB activity at 33% in Q3 2021, compared to the city’s long-term average of 29%. Dunedin recorded the most significant growth, registering a FHB market share figure of 30%, eight percentage points above its average of 22%.

First time property owners are paying slightly less than the rest of the market, notably in the country’s most expensive city Auckland, where FHBs paid a median price of $900,500 in Q3 2021. The figure is $149,500 less than the median price being paid by all buyers ($1,050,000) in Auckland. 

The gap was also more than $100,000 in Tauranga, where FHBs paid a median price of $760,000 compared to Wellington, where $800,000 was the median price paid to get into the market.

FHBs in Christchurch paid a median price in excess of $500,000, but the figure remains lower than Dunedin, where the median price paid during the quarter was $566,125.

The most expensive FHB market across NZ’s main urban areas was Queenstown, where a median price of $860,000 was paid by FHBs, followed by Kapiti Coast at $777,500 and Palmerston North, Whangarei, Napier, and Nelson where FHBs paid more than $600,000. Amongst the main urban areas, Invercargill was the country’s lowest priced FHB market, with a median of $382,000 in Q3 2021.

Freestanding houses accounted for 72% of FHB purchases in Q3 2021, down sharply from the full-year figure of 78% in 2020, as affordability constraints forced buyers to consider flats. The percentage of flats – defined as townhouses and other shared wall properties - purchased by FHBs was 18%, up from 14% last year.
 
Mr Davidson said FHBs were taking the opportunity to get into the market, capitalising on strong financial incentives to buy rather than rent, filling the gap left by a decline in mortgaged investors’ market share who faced tougher conditions due to tighter lending restrictions.

“It will be interesting to see if the FHB market share can hold up at similar levels in the coming quarters, given that the low deposit lending speed limit is now much tighter,” he said.

Key insights from this report include:

  • From July to September 2021, FHBs had a market share of purchases of 26.4% – well above the average of 21.8%, and moreover a new record high.
  • On average a FHB requires 10.5 years to save a deposit. 
  • Auckland FHBs spent a median $900,500 in Q3 2021 to get into the market compared to those in Invercargill, who spent $382,000.
  • Standalone houses accounted for 72% of FHB purchases in Q3 2021 – down sharply from the full-year figure of 78% in 2020. 
  • FHBs have purchased relatively more flats (commonly a property with a shared wall that isn’t an apartment), with this property type now accounting for 18% of their activity, up from 14% last year.
  • The median price paid by FHBs in Q3 2021 was $660,000, up from the figure of $565,000 for 2020 as a whole, but lower than Q2 2021’s number of $685,000 – when houses were a larger share of their purchases.