First-home buyers have taken out more housing mortgages with banks than any other buyer group in New Zealand over the past five years. This may mean that current housing policy is flawed.
A joint report released by the Property Institute and property data company Valocity has measured “mortgage registrations” - the number of mortgages uplifted according to the different classifications that buyers identify with when they buy a property. It shows that first-home buyers have dominated the number of new mortgages uplifted in each of the past five years in every part of the country except Auckland.
It’s fair to say that these results came as a shock. Every commentator in recent years has been concerned about the impact of house price inflation, on first-home buyers – so the discovery that they’ve been the largest group of buyers in the market is something of a bombshell.
The figures do not include properties that were bought without the need of a mortgage or properties that were purchased by foreign investors who sourced their mortgage funds offshore, but it’s unlikely these numbers would change the overall picture significantly.
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Unless you buy into the now thoroughly discredited claim that foreign buyers made up more than 30 percent of the market, these additional purchases would be on the fringes and are likely to confirm the overall trend.
This new information may lead to a review of current policies designed to support first-home buyers.
Both National and Labour have been fixated on addressing the situation facing first-home buyers in order to help more of them get into the market, but these figures suggest that this may not be the problem we all believed it to be. If that’s the case, then maybe programs like KiwiBuild need to be targeted more broadly and with a focus on making those homes available to those in the greatest need rather than only those who are buying their first home.
The figures also provide a clearer picture of how the market has performed over the past five years and demonstrate that the property market peaked in 2016.
Almost without exception, the number of mortgages uplifted by every buyer group peaked in 2016 and has dropped away since then. That’s the clearest indication, yet, of when we reached the top of the market.
For those who follow New Zealand property cycles, this information allows us to predict where the market will go over the next 10 to 12 years with some degree of accuracy.
We know from experience that property values roughly double in Auckland every 10 to 12 years and, based on this “rule of thumb” I’m of the view that the next cycle will start in 2021/2022 and that, by 2026 or 2027 the median house price, in Auckland, could be around twice what it is now.
- Ashley Church is chief executive of the Property Institute.
