Embattled first home buyers have been leaving the market, with a new report showing their share of purchases fell to the lowest level in three years earlier this year.
First home buyers accounted for a 21.5 per cent market share nationwide in the first three months of this year, according to CoreLogic’s latest first home buyer report.
That was down from 24.8 per cent six months ago and at its lowest level since the start of 2018.
CoreLogic chief property economist Kelvin Davidson said this suggested first home buyers were fatigued by the struggle to keep up with escalating house prices and deposit requirements.
READ MORE:* Property investors dominated market in March, data shows* Govt reforms put investors and first-home buyers on collision course* First-home buyers’ hurdle increases again, data shows
The red-hot, competitive market over the first quarter was much tougher for first home buyers and stretched conditions too far for many which led them to step back, he said.
The Governments move to cool the market with tax policy change for investors might have come at the right moment for many first home buyers.
While its too soon to tell how much impact the new measures will have, investors have been disincentivised from buying existing property and that should open the market up for first home buyers.
Anecdotal evidence and early market indicators, such as bank-ordered valuations which had dipped only slightly, suggested the market mix was changing and first home buyers were returning, he said.
Besides the hot market, there was another factor which might have put first home buyers off earlier this year. Current loan to value ratio restrictions (LVRs) mean owner-occupiers need a 20 per cent deposit.
CoreLogic chief property economist Kelvin Davidson says the Governments new housing policies may have come at the right time for fatigued first home buyers.
There was evidence some would-be first home buyers had become so discouraged by this that they were giving up on buying, Davidson said.
Yet banks could make use of the Reserve Bank-mandated speed limit and allow up to 20 per cent of owner-occupier loans to be made at less than a 20 per cent deposit.
Mortgage data showed about one-third of first home buyer loans in March were done at less than 20 per cent deposit, he said.
So first home buyers would be well advised to pursue their options with a mortgage adviser or bank. There is more flexibility in the lending market than many think.
The report also included new data which revealed that the average age of first home buyers had not gone up over recent years.
First home buyers are now more willing to look at different property types, such as apartments.
Instead the national average had stayed at 34 since 2017 and was even younger at 31 in provincial areas where affordability was less stretched.
Davidson said a major reason the average age had held steady, despite growing affordability pressures, was a willingness to move further afield or to look at different or cheaper property types.
Nationwide, houses accounted for 75 per cent of first home buyer purchases in the first months of this year, down from 77 per cent last year.
But in Auckland houses made up 65 per cent of purchases and in Wellington they equated to 70 per cent of purchases. Additionally, houses accounted for a lower than average share of first home buyer purchases in all the main centres, apart from Tauranga.
That was a sign that first home buyers were compromising on property type, Davidson said.
Christchurch remains the standout centre for first home buyers.
They are not buying [more expensive] houses as often, instead they are shifting towards smaller and cheaper dwelling types in areas like Auckland, Wellington, and Hamilton.
In recent years, first home buyers had shown particular interest in the new build segment of the market, but the Governments housing policies meant they could now face increased competition from investors in this area, he said.
The national median price paid by first home buyers was $650,000 in the first quarter was more than last years median of $576,500, CoreLogics data showed.
But it was less than the all-buyer national median price of $725,000 and in each of the main centres first home buyers paid a median price that was lower than the all-buyer price in the first quarter.
The gap between median prices was largest in Auckland, where first home buyers paid a median of $877,000 while the all-buyer median was $1,010,000.
Davidson said the standout centre was still Christchurch, where the first home buyer median price was below $500,000, which was lower than in many provincial areas.
The relative affordability in our second-largest city is much better than anywhere else, and its especially appealing for first home buyers because the citys business community is established and jobs are on offer.
