New figures from OneRoof and its data partner Valocity show just how much first home buyers in Auckland are benefiting from a marked lack of competition from investors and existing homeowners on the move.
First home buyers are filling the gap, with their share of new mortgage registrations this quarter hitting 30.5 percent - a jump from 24.3 percent in the same quarter in 2015, when the market was peaking in Auckland.
The share of new mortgage registrations to investors fell from 19.4 percent in 2015 to 18.2 percent now, while the share of new mortgage registrations for movers went from 11.2 percent to 10.1 percent over the same period.
OneRoof editor Owen Vaughan said: “However, the big drop off in house-buying by investors and existing homeowners is more pronounced when you look at the actual number of registrations. Investors bought almost 1000 fewer properties this quarter than they did in 2015 - 1837 compared to 2809.
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“Movers bought 1622 properties in Auckland in the third quarter of 2015. This quarter they bought just 1016.
“The number of registrations by first home buyers also dropped, from 3513 to 3080, but, with investors looking elsewhere, first home buyers now have room to compete. The median price of home they are buying in Auckland - $750,000 - suggests that it is the investor drop-off that's benefited them most.”
Choosing to wait out the slump
James Wilson, valuation director at Valocity, said the slide in buying activity by movers was tied to inertia in Auckland's higher value suburbs, “with more homeowners choosing to either refinance and improve their current home or simply wait out the market slump”.
The market dynamics playing out in Auckland can also be seen in Hamilton, where the percentage of new mortgage registrations to first home buyers rose from 26.4 percent in 2015 to 34 percent now, and investor activity plunged from 29 percent to 17.8 percent over the same period.
New mortgage registrations by first home buyers in Tauranga was up slightly from 26.6 percent to 28.9 percent but investors seem to have all but deserted the city, with their share of new mortgage registrations down from 20.9 percent to 12.8 percent.
The change in the actual number of new mortgage registrations by investors in both Hamilton and Tauranga highlights their withdrawal more strongly: from 465 to 229 in Hamilton and 305 to 143 in Tauranga.
Investors eye new markets
The OneRoof-Valocity numbers also suggest that first home buyers are starting to feel the squeeze from investors in lower priced markets such as Whanganui, where the investor share of new mortgage registrations was up from 15.1 percent in the third quarter of 2015 to 25.7 percent now, or from 34 purchases to 87.
Queenstown numbers show fewer purchases from first home buyers and investors but investors have managed to maintain a stronger hold on the market, with their barely changing, while the first home buyer share has dropped from 24.2 percent to 19.7 percent.
First home buyers have increased their share of new mortgage registrations in Christchurch at the expense of investors (they now account for 34.2 percent of purchases, compared to 29.6 percent in 2015 while investors have shrunk from 22.8 percent to 19.7 percent) but the actual number of purchases by both groups has dropped.
Fewer purchases are being made by both groups in Wellington but their share of the market has barely changed. The spread of buying activity in Dunedin has not changed much either, although the number of properties being bought by first home buyers and investors is up on 2015.
The number of new mortgage registration by first home buyers in Hamilton is also up on 2015, from 421 to 441. Strong employment prospects in both cities will have contributed to the lift.
Good time buy
Real Estate Institute of New CEO Bindi Norwell says first home buyers are also benefiting from the OCR being cut to record lows and most of the major retail banks offering low mortgage rates.
“One of the biggest problems first-time buyers face when saving for a house in a strong market is that their savings can’t keep up with the pace of house prices.
“However, looking at REINZ’s residential property data, Auckland region’s median house price has increased by a moderate 3% over the last 3 years from $835,000 to $860,000. This has meant that for many first-time buyers, for the first time in a long time, their savings are not falling behind house price rises and that there is a chance for them to get a foot on the market.
"Whereas, if you look at the Hawke’s Bay or Manawatu/Wanganui regions, both of these markets have seen double digit annual growth rates for a number of months now, making it extremely difficult for first-time buyers’ savings to keep up with the price rises.”
Norwell adds that families looking to upgrade their property, be it to a larger property or to a school zone of their choosing, could benefit from the shift in affordability. “That the step up to the next property is likely to be more affordable, or they might even be able to afford a slightly larger home than initially anticipated for their budget. For those looking to downsize, it’s a similar story as people are buying and selling in the same market. Again, while they might not get as much for their current property, the property they are looking to purchase might be even cheaper than they had anticipated.”
