1. Will first-home buyers lose out in 2025?
The latest CoreLogic buyer data shows that first-home buyers dominated throughout 2024, accounting for 26.1% of property purchases, a new record high. The actual number of purchases was at 21,000 solid, too. So why are first-home buyers doing relatively well in the current housing market? Access to KiwiSaver for at least part of the deposit is one factor. Low-deposit lending is another. Buying new-build properties also helped get them around the 20% deposit rules, and I estimate that first-home buyers accounted for about 27% of new-build buying activity in 2024.
First-home buyers might not have everything their own way in 2025. After all, relocating owner-occupiers seem to be getting more confident again as it gets a bit easier to sell their house before purchasing the next one, and mortgaged investors have certainly started to eye up the market again, mostly as the required cash top-up from other income on a new rental property purchase falls alongside mortgage rates.
In this environment, it’s conceivable that first-home buyers’ market share will fall in 2025. But they’re still likely to buy a higher number of properties than last year. Rumours of their demise in 2025 appear to be greatly exaggerated.
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2. Has the unemployment rate reached its peak?
One reason to think that any upturn in the wider housing market this year could be fairly muted is the ongoing rise in unemployment, with Stats NZ confirming last week that the rate rose from 4.8% in Q3 last year to 5.1% in Q4, the highest level since late 2016 (aside from the temporary Covid-related spike in 2020). This is obviously not a good outcome, but it was nevertheless in line with expectations and it’s still the case that the labour market hasn’t completely collapsed. Indeed, it’s possible that the worst of the labour market’s decline is firmly behind us.
What about interest rates? The latest labour market number will be no barrier to a likely 0.5% Official Cash Rate cut on February 19, with some mortgage rates probably set to also drop a bit further (in fact the banks are already lowering rates now).
CoreLogic chief economist Kelvin Davidson: "One reason to think that any upturn in the wider housing market this year could be fairly muted is the ongoing rise in unemployment." Photo / Peter Meecham
3. Dwelling consents almost certain to be at the trough
Stats NZ’s figures last week showed there were around 2500 new dwellings consented in December, flat from the same month last year and meaning that the annual running total still sits in the 33,500-34,000 range – as it has done since June. In other words, after a long downturn (from a very high peak), the construction sector is now seeing some glimmers of light ahead, and with mortgage rates now lower, 2025 should be a (slightly) better year for house-builders. It’s also important to note that consents remain far higher than in previous downturns, so the risks of ‘housing shortages’ (and price spikes) emerging are much lower than before too.
4. Borrowers may have rushed back to fixed rates in December
We’ll get the Reserve Bank’s latest mortgage lending data this week, and after a rush to floating rates in November (as people waited to see what the RBNZ was going to do with the cash rate on 27th of that month) I’d expect to see that fixed rates became much more popular again in December – albeit still at the shorter end of the curve.
5. Inflation pressures probably still subdued
Stats NZ’s selected price indexes data for January will be out on Friday this week, and general inflation pressures across this monthly basket of goods and services (about 45% of the benchmark quarterly CPI) should have stayed fairly subdued, with flat property rents a part of that story – as net migration eases and supply increases. Once again, no barrier here to another OCR cut.
- Kelvin Davidson is chief economist at property insights firm CoreLogic
