Real estate agents say now is the time for first-home buyers to get on the housing ladder, warning those who wait too long could regret their decision when competition amps up again.
Their comments come after new data from OneRoof’s data partner Valocity shows the number of first-home buyers purchasing property plummeted by nearly half (47.6%) in the first quarter of the year compared to the same period a year ago.
Those who did buy, however, paid $100,000 less on average than those who bought at the same time last year.
First-home buyers paid a median price of $700,000 in Q1 2023, which is nearly $300,000 less than the national property value.
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The data also shows the country’s two biggest housing markets, Auckland and Canterbury, had the lion’s share of first-home buyer purchasers (2197 and 690 respectively) whereas the West Coast, the smallest and cheapest market in the country, had the fewest at just 13.
However, the figures reveal first-home buyer activity was down in every region, including Auckland where it was down 51.2%, Canterbury (-54.6%), and Wellington (-38.2%).
The numbers fell by more in metro cities in the regions. In Christchurch, for example, first-home buyer purchases in the first three months of 2023 were down 62.7% while in the capital they were down 48.2%.
They were also less active in Dunedin, Hamilton, Tauranga and Queenstown-Lakes, where the median purchase price for first-home buyers is one of the highest, $915,000, although down 17.5% ($195,000) on Q1 2022.
Fred Bramwell, Colliers’ director of residential sales in Queenstown, is surprised the figure isn’t higher, saying first-home buyers often take on big mortgages and entry level is more like $1.1 million or $1.2m.
“A lot of them are just trying to hang on and stay here. They take on big mortgages, it just seems to be the norm. We've been one of the most expensive places in the country for years,” he says.
Under $1m is at the lower end of the market in the apartment range, and a type of living Kiwis are not used to so “they try and stretch to that $1m-plus range to get their first property is what we see a lot of times”.
Investors and relocators pay a lot more, and in a different category are expats not in the usual first-home buyer price range who may spend in the millions but who are still buying for the first time in New Zealand.
The OneRoof-Valocity data shows while first-home buyers do generally operate at the lower end of the housing market, there are exceptions – the most expensive first-home buyer purchase since 2022 was $5.6m paid for a luxury beachfront home in Langs Beach, Whangarei.
But in the usual first-home buyer market, where prices are down and competition is low, agents up and down the country say now is the time to move and that there are some great buys to be had.
Auckland was the most expensive region, with a median price of $895,000 paid by first-home buyers in Q1. Ray White Manukau director and branch manager Tom Rawson says there has been an increase in activity in the south of the city.
A success story at a recent auction in his patch saw a three-bedroom property in Papatoetoe go to first-home buyers after the investor-seller decided to give them a “lucky break”.
“It’s quite a heart-warming moment when you have someone go: ‘Who is it?’, ‘First-home buyers’, ‘Oh, okay then, we’ll do that’.”
The buyers paid $660,000 for the home which had a CV of $810,000 but Rawson says a year ago the price would have been closer to the CV.
“Now it’s fallen to just within a first-home buyer’s price point, which is awesome.”
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He says it’s still a complicated lending environment for first-home buyers but the Papatoetoe newbies had done their due diligence and had their ducks in a row.
For those able to bid at auction, now is a good time because they may be one in two bidders, whereas a year ago they may have been one in seven, he says.
While the Reserve Bank has indicated there could be further housing price falls to come, Rawson says it’s hard to know when it’s as good as it gets for first-home buyers.
“That’s the trouble with good as it gets – we only know after the fact.”
The data shows first-home buyer transactions fell across 27 territorial authorities in the first quarter of the year and almost all regions saw a year-on-year drop in the median sale price, but the Wellington region had the biggest price drop.
The median sale price for first-home buyers there was $629,250 – down 20.6%, or $181,750, year-on-year.
Grant Henderson, regional general manager for Bayleys Wellington, says first-home buyers are out looking but not always transacting.
He says it’s a “conundrum” as to why Wellington region has dropped the most but adds that overall sales volumes have slowed dramatically.
This three-bedroom home on Nogat Avenue, in Papatoetoe, recently sold under the hammer to first-home buyers. Photo / Supplied
First-home buyers snapped up this three-bedroom home on Brittan Drive, in Rolleston, Selwyn, for $589,000. Photo / Supplied
Wellington region had the biggest rise over the shortest period of time and that caused people to step back and go “wow”.
There is good first-home buyer stock around, especially in the Hutt Valley and Wainuiomata, and Henderson’s advice is for first-home buyers to buy now and fix for a year, saying as soon as interest rates start to shift downwards competition will be back and that will drive prices up.
He says there is always pain, no matter when first-home buyers enter the market.
“There was pain before when interest rates were sub-3% because you were having to overpay and you weren’t getting where you wanted to live.
“Now, you can choose where you want to live, you’re not paying as much and, yes, there’s some short-term pain at the interest rate but once that changes then you’ll be going ‘oh, gee, we only paid $550,000 for that, now it’s worth $700,000, it’s cost me a bit more in interest but look what I’ve saved in purchase price’ and that’s the bigger number.”
Canterbury’s price discount was relatively small by comparison to other areas, coming in at only 6.2% down to a median of $590,000.
Brendan Shefford, Ray White business owner in Rolleston in Selwyn District, says there’s no hiding from the fact buyer numbers are down generally.
“The rolling average of sales has gone from 100,000 a year to 60,000 a year.”
But there are first-home buyers still purchasing and he also says now is a great time to buy.
He says a property on Brittan Drive, in Rolleston, recently sold to first-home buyers for $589,000 but the first-home buyer market has seen ups and downs in recent years.
Before Covid arrived the market was solid but when it boomed after Covid, first-home buyers lost their opportunity to buy.
Independent economist Tony Alexander says the favourable buying conditions could end quite suddenly. Photo / Fiona Goodall
Some saved up and tried to get in but interest rates started going up, and the CCCFA credit rules were changed, and LVR rules came in which hampered buyers.
Both the CCCFA and LVR restrictions are due to be relaxed, however, and Shefford, too, warns first-home buyers not to wait for the market to change again.
“First-home buyers have basically got the opportunity to be negotiating by themselves at the moment.
“If they leave it too long they’ll be in competition again and then they’ll be battling it again.”
He says changes could come in the next 12 months and there could be a change of government at the end of this year.
To first-home buyers who have pre-approval for a loan, he says “what are you waiting for?”.
“Banks can quite easily change their position. They might turn the LVR back to 20% and at the moment they’re going ‘well, you can actually get in on 10%’.
“You might get a three-month window to buy a house and there’s been plenty of people who have thought they’ve been pre-approved then they’ve gone back to the bank and it’s been like, ‘no, pre-approval has run out’ and the hoops they’ve had to jump through to get re-qualified have been incredible.”
In Christchurch, which saw more than half first-home buyers falling away, agent Nick Cowdy, principal of Cowdy Real Estate, thinks sometimes first-home buyers are the ones who get the jitters in the very market they should be moving in.
They are a buyer group susceptible to feeling nervous around decision-making but in reality the most unnerving time to buy is often the best time to buy.
“I really want to hold them by the hand and say ‘look, you know, you’re buying a house for yourself, you can’t tell what’s happening in the future but history tells me this is a really good time to be looking at things seriously’.”
Tony Alexander, an independent economist, has also warned first-home buyers of change coming.
He said many have been sitting back since the start of last year watching house prices falling, unwilling to contemplate making a purchase until they feel prices have bottomed out, “but there must be tens of thousands of people in this queue of potential buyers and at some stage they’re going to reach a collective decision that there is no point waiting any longer”.
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