First-home buyers competing among themselves have driven down prices at the lowest housing bracket over the last 12 months, new research suggests.
That’s largely because investors, their usual competitors, have sat on the sidelines leaving first-home buyers a free run at entry-level properties.
Research by QV figures shows home values have fallen further on average at the bottom of the market than at the top.
The figures show values in the lower quartile – defined as the 25% lowest value properties – fell an average of 14.6% across the main urban centres in 12 months, compared to an average reduction of 12% at the more expensive end of the market.
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The lowest housing bracket has fallen in 12 out of 19 main urban centres since April last year and across more than half the country’s councils.
Of the largest cities, low-end values fell the most in Lower Hutt (down 22.5%), Napier (-21.7%) and Wellington City (-21.1%), and Auckland was around the middle, with values sliding 14.1%.
The centres which fell the least were Christchurch (down 9.1%) and Dunedin (-6.1%).
Quotable Value operations manager James Wilson describes the fall at the bottom end as a weird phenomenon.
“When you take one group away, not entirely, but investors stepped back quite a bit, the net result is the price that the other group, so first-home buyers, are having to pay for entry-level stock comes backwards.”
First-home buyers have been able to capitalise on that environment and get better buys than they would have 18 months or 24 months ago, Wilson says, and that’s happened almost across the whole country.
On Wednesday, the Reserve Bank increased the OCR rate by another 25 basis points but Wilson says the most important part of the announcement was the bank calling a halt to any more increases.
He thinks it’s unlikely investors, who have been watching and waiting, will be back in the market overnight, although some could start to become active again.
It's also hard to say if the bottom end of the market has reached its bottom, and Wilson thinks there will be a lot of variance between locations and property types around the country when the market strengthens again.
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“They will probably be in areas where investors have taken the biggest pause, they've stepped right out but when they begin to re-enter again expect to see strength back into those markets.”
The statistics are good news for first-time buyers and show they have been active, although sales volumes across all markets are down.
“They've had less competition in the buying market over the last 12 months than they've had for a long, long time so despite some of the gloom and doom in the headlines there’s actually been a bit of a positive narrative for first-home buyers who were able to buy because they've had less competition.”
Quotable Value operations manager James Wilson says first-home buyers have faced less competition from other buyer groups in the last 12 months. Photo / Fiona Goodall
Wilson does not think first-home buyers who have not already acted have left their run too late.
“There's a saying in the housing market don't wait too long because when it hits the bottom it can bounce back quick.”
But he does not think the bounce back will be sudden this time, and says first-home buyers have time to act.
The Reserve Bank has given them a window, although he does not advise they wait too long.
“Then they risk hitting the point where investors have come back into the market and values are beginning to strengthen and they are back into a competitive environment.”
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