The amount of money first home buyers are paying to get into a home of their own is following house prices down.
Interest.co.nz estimates first home buyers paid an average purchase price of $655,000 in July, down $21,000 compared to July last year.
The estimated average price first home buyers have been paying to get into a home of their own has declined by $53,000 since it peaked at $718,000 in April 2022.
This means they have also been borrowing less.
According to Reserve Bank lending figures, the average size of the mortgages approved to first home buyers in July was $548.000, down from a peak of $595,000 in May 2022. This suggests that on average, first home buyers are carrying around $47,000 less debt than they were two years ago.
However that debt will be expensive for some of those borrowers, because 35% of the mortgages approved to first home buyers in July were low equity loans where the borrowers had less than a 20% deposit.
Banks charge a healthy premium for those types of loans, which pushes up their mortgage payments significantly, and with mortgage interest rates only just starting to retreat from their recent highs, the borrowers with low equity mortgages are likely paying plenty for the privilege.
The proportion of low equity loans being taken out by first home buyers has been tracking steadily upwards for the last couple of years, from 25% in July 2022, to 31% in July 2023 and 35% in July 2024.
The Reserve Bank figures also show 2583 mortgages were approved for first home buyers in July and their numbers have been around the 2500 a month figure for the last five months, which is about the same as it was in the middle of last year, suggesting their participation in the housing market remains relatively stable.
However with house prices generally remaining soft and interest rates expected to continue on a downward slope for the next year or so, we could well see an increase in the number of first home buyers getting into a home of their own as the market moves into summer.
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49 Comments
"a strange expression involving cats!"
Tron, are you referring to the expression "twitching cat" or "dead cat bounce"? While neither are healthy analogies they were proven to be right. I think "suckers market" was used for a while there too. While the market is increasingly supported by FHB's signing on with low equity loans, who's to say it still isn't a "suckers market". It appears there's still ample evidence further falls are coming and offers should be lowball territory in this buyers market.
Have to do the same in summer here, but other ways of doing it but not wind powered like that. Pros and cons I guess, not going to get a lot of removal with no wind and you have compromised the roof. Probably stick with electric here, its only for a month or two typically.
Ah, yes. But as Tony might remind us " I don’t pay much attention to housing affordability measures in New Zealand....Prices will soon start rising again on average because of falling interest rates..... leaves me favouring a scenario of good times peaking with annual growth between 10% and 15%"
https://www.oneroof.co.nz/news/tony-alexander-should-kiwis-be-getting-r…
Tony Comb has been trying to kick the reluctant, dead cat upwards since 2022, when his every word backfired into the biggest crashing housing market, since the 1970s.
When will the Comb just give up and realise his spruiking no longer has its magical powers? - as high interest rates, continue doing the good price lowering work, going forwards.
Housing appreciation/growth above wage/rent inflation creates a bubble in real/inflation adjusted terms - because wages/rents are the cash flows that determine the present value of those cash flows.
10-15% annual gains aren’t something that should be cheered because all they do is create severe financial (and social) instability for the whole country. And they are extremely unrealistic/unsustainable over the long term - especially if interest rates are flat or rising which is quite possible over the coming decades. Sustaining 10-15% gains would require very high wage/rent growth with falling rates - but if we have very high wage/rent growth then rates will be going up..like 10% + up and asset prices would then be falling once more.
I think it is just as likely we see 10-15 % annual falls for a few years than gains of the same magnitude.
One notes Tony has finally recognised some change in market fundamentals when pays lip service to them in these lines:
- Changes in housing rules allowing more densification and making more development land available; and
- A relatively high level of housing construction this cycle compared with past ones.
Note he makes no effort to quantify their impact nor explain their full significance (except to highlight just how many more we're building now - which sinks his nonsense dead in the water!)
So, still spruiking.
Edit: This bit was a laugh out loud moment - especially as his opening paragraphs diss 'affordability' !!!
"This implies less than usual scope for house prices to soar and again leaves me favouring a scenario of good times peaking with annual growth between 10% and 15% ..."
This is indeed very good news. Us lucky boomers had it easy when we got on the ladder. I have never had home loans more than 2-3 times income. I am now on my third home which some would say is worth close to $3m. It’s about time those who are entering the market now had some luck and fortune come their way.
I don't even know if they were actually prepared to work for it.
Why else did they rush out to borrow 2 x their income at such high interest rates? Could've just saved 3 x their annual income (like young people are doing today just for a deposit) with the huge tailwind of double digit term deposit rates and bought the house outright with cash.
From my experience the younger workers today actually work harder than the boomers. In my university holidays I worked for the government which was building a power station. Talk about the boomers taking the piss. They were slow and lazy and took home anything not nailed down. Eventually many of them got a government pension. The taxpayer always pays a lot more when it builds something compared to the private sector.
Yes was going to say this as well - my experience is those in their 20’s-40’s are far more productive than those clogging up positions in management while those in their 60s and sometimes now even 70’s and refuse to quit (while clearly not needing money as they are mortgage free with a holiday home and driving to work in the Bentley or Aston Martin between European holidays - not kidding this is the workplace experience of the last 10 years).
Younger generation can’t afford a house, drive to work in a Toyota Corolla, but are far more technology savvy and appear to be 2x (or at the extreme in some software IT projects 5-10x) more productive than those clogging up rows while in their 60’s.
Ex Agent, are you serious?
Why have you got this thing against Boomers?
You are very hard to understand, you clearly have some issues.
Boomers did not have easy whatsoever, they paid far higher interest rates for a very long time.
you are wrong about younger ones working harder than Boomers, quite the opposite in fact.
This is indeed very good news. Us lucky boomers had it easy when we got on the ladder.
That's the spirit EA. Every generation has its opportunity. The boomers had houses. And I guess you could say Gen Xers had Amazon and a fruitful IT industry.
The Millennials and Gen Z have BTC, crypto, and NFTs. But it looks like the boomers are not happy about this. The SEC are now trying to suggest NFTs are securities.
Devin Finzer, the company’s CEO, posted on social platform X Wednesday (Aug. 28) that the Securities and Exchange Commission (SEC) issued a Wells notice against OpenSea.
In this case, Finzer wrote, the SEC is alleging that the non-fungible tokens (NFTs) sold on its marketplace count as securities.
“We’re shocked the SEC would make such a sweeping move against creators and artists,” Finzer wrote in the post. “But we’re ready to stand up and fight.
https://www.pymnts.com/nfts/2024/nft-marketplace-opensea-gets-wells-not…
Yvil I could never have been an agent. I would not have been able to cope with how people feel about them. I consider them one of if not the most overpaid sectors in New Zealand’s work force. I would rather be a politician which I never was. I am well retired enjoying my children and grandchildren whom I have effectively housed.
From the US - inflation adjusted house prices are now in a larger bubble than they were at the peak leading into the GFC.
https://x.com/kobeissiletter/status/1711807929869910344?s=46&t=MUwQeKa7…
More cheap debt is not the solution to our problems! So painful to watch the extreme/insane booms/busts with reckless monetary and fiscal policy.
If you read Shillers book Irrational Exuberance it shows real returns of all asse types over the past 100+ years. Housing was essentially flat for 100 years prior to around 1990 in the US. Makes sense as how can an asset appreciate over a long term at a higher rate than the cash flows that determine its present value (ie wages/rents).
https://www.amazon.com.au/gp/aw/d/0691166269/ref=dp_ob_neva_mobile
It is why I think that NZ (Aus and Can) who didn’t reset in 2008 could be in an extremely large bubble in real terms - far larger than what the US is currently experiencing in the graph above.
"The proportion of low equity loans being taken out by first home buyers has been tracking steadily upwards for the last couple of years, from 25% in July 2022, to 31% in July 2023 and 35% in July 2024."
Not all good news ... Does it get worse?
"Banks charge a healthy premium for those types of loans [low equity loans] ...''
Yeah. It does.
Can anyone tell me how much extra banks charge for a low equity loan?
It varies a bit by bank from memory. Typically it's on your LVR. Here is asb as an example:
80.01-85.00%: 0.30% p.a.
85.01-90.00%: 0.75% p.a.
90.01-95.00%: 1.30% p.a.
>95.01%: 1.50% p.
BNZ is removing their charges :https://www.stuff.co.nz/money/350384653/bnz-scraps-higher-interest-rate…
Hopefully that's what you were after.
Thanks Pascal.
I wonder if ASB used this rort to fool high income earners who were borrowing on low DTI multiples into paying way over the odds in interest simply because their LVR was high. (The LVR rules from the RBNZ are over all a bank's borrowing - not a single mortgage.)
When I was young and looking to borrow at a DTI multiple of about 2.5, but a deposit of only 5%, some banks would try this on.
I told them to Foxtrot Oscar ... and went looking for another bank.
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