First home buyers benefit from lower prices and less competition

By earthnews
6 months Ago

First home buyers benefit from lower prices and less competition

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First home buyers made up 26 percent of property purchases in the first quarter of 2024, well above the long-term average of 21 percent. File photo.
Photo: 123RF

First home buyers are taking full advantage of lower property prices and less competition from other buyers, the latest data is indicating.

First home buyers accounted for 26 percent of purchases in the first quarter of 2024, which was well above the long-term average of 21 percent, according to CoreLogic’s biannual First Home Buyer Report.

NZ chief property economist Kelvin Davidson said first home buyers were taking advantage of the low-deposit lending allowances at banks, and FHB grants and loans, with some buyers compromising on the location and type of property.

But he said fewer deals were settled in the first quarter, reflecting the overall downturn in the housing market.

“There was a small burst of price growth at the tail end of 2023, but more listings became available over the first few months of 2024, which has contributed to a slowdown in property values, as conditions swing back in favour of buyers,” he said.

The median house price fell to $695,000 in Q1 2024, compared with $699,000 last year, and $715,500 in 2022.

“The price being paid by FHBs (first home buyers) is significantly higher than the lower quartile, or bottom 25 percent, of all buyers, where the median price is $565,000,” Davidson said.

“It shows that the ‘typical’ first home buyer doesn’t always enter at the bottom of the market and work their way up. Many actually enter the market well above the ‘bottom rung’ of the ladder.”

Davidson said the increase in first home buyers also defied a significant gap between the cost of a mortgage and rents.

“With mortgage rates having risen sharply, and even despite a recent acceleration in rental growth too, the extra cost to pay the mortgage compared to rent is still quite high,” he said.

“With rent being significantly cheaper it certainly highlights that most first home buyers are likely to be purchasing for reasons such as stability of tenure rather than due to simple financial drivers.”

Davidson said average FHB activity was expected to continue this year and possibly into 2025 as well, particularly given other buyer groups, such as investors, were still facing challenges.