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19 Oct 2020

First Home Buyers Stake a Claim

House prices in New Zealand continue to rise amidst a backdrop of global economic uncertainty. Despite rocketing prices, however, first-home buyers have entered the market in record numbers across the country. According to figures from the Reserve Bank of New Zealand (RBNZ), first-home buyers have been taking out home loans at a rate of $1.3 billion-a-month over recent months. Accounting for a massive 25% of all residential property sales, first-home buyers have recorded their biggest share of the housing market in at least 15 years.

According to the latest Market Pulse report from CoreLogic, first-home buyers accounted for 25% of all residential property sales in the third quarter of 2020, which is their biggest segment since records began in 2005. While a sharp rise in young new buyers may seem unexpected in the current coronavirus climate, lack of overseas travel opportunities, KiwiSaver withdrawals, and record low interest rates have helped many to save for a mortgage deposit. According to CoreLogic, there is also a growing willingness for young people to consider purchasing apartments rather than standalone houses.

According to separate 2020 data from RBNZ, first-home buyers took out $484 million in home loans in April, $801 million in May, and a massive $1.09 billion in June. In August, first-home buyers took out $1.34 billion in home loans, which is a level never seen before. Despite the obvious calamity of the global pandemic, it seems to have inspired an increasing number of young Kiwis to put down housing roots. While the property market hasn't fallen like some people expected, good deals, strong supply, and a growing need for certainty has had an influence on the numbers.

KiwiSaver withdrawals also reached record levels in early 2020, with more than $1 billion withdrawn by first-time buyers for the first time ever. According to a Financial Markets Authority report, $1.192 billion was withdrawn in the period ending March, which is much more than the $953 million recorded in 2019, and $723 million from 2018. Overall, there were 44,300 KiwiSaver withdrawals made in the 12 months to March this year, which was up from 39,600 recorded over the previous 12 months.

Along with renewed energy from first-home buyers, investors also made their presence felt across New Zealand. In fact, investors only just managed to overcome first-home buyers in terms of market share, representing 26% of the New Zealand housing market in the third quarter of 2020. This is the highest level recorded since the 28% peak set in the third quarter of 2016, which was just before the Reserve Bank introduced a 40% minimum deposit requirement for residential property investors. Investors and first-home buyers now represent more than half the housing market, with existing home owners seemingly less inclined to sell and move up the property ladder in current uncertain economic conditions.