Since the start of 2012 a total of 20% of the sales of houses, flats and apartments have been to first home buyers, Property IQ says, with sales to first home buyers rising since Reserve Bank restrictions on banks' low equity mortgage lending were introduced on October 1.
Property IQ says it recently began categorising property sales in a way that makes it able to identify whether new home owners are first home buyers, movers or property investors.
"The data for October and November, in the first two months following the introduction of the (Reserve Bank's loan-to-value ratio) LVR caps, shows a slight nationwide increase in first home buyer activity," Jonno Ingerson, Property IQ's research director says.
"This is perhaps not surprising given that there would still have been people with pre-approved loans, and the expectation that there would be a rush of first home buyer activity before the market settled. So far there have been no dramatic changes in any areas, but that may be yet to come," Ingerson added.
Property IQ says across New Zealand 20% of sales of houses, flats and apartments since the beginning of 2012 have been to first home buyers. It has defined a first home buyer transaction as one where none of the new owners have owned property in New Zealand previously, and they have also taken out a mortgage.
Ingerson told interest.co.nz the volume of first home buyers, as a percentage of the overall national total, was 20.3% in August which was a 5% year-on-year increase. In September it was 22.1%, a 13% year-on-year rise, 22.7% in October giving a 12% rise year-on-year, and 24.8% for part of November making for a 26% rise year-on-year although the full November figures aren't yet available.
In September Finance Minister Bill English said Reserve Bank advice was that its restrictions on low deposit lending could force about 25%, or 7,000, first home buyers to delay or downsize their home purchase. See our story on this here and more detail here.
Ingerson notes that, as you'd expect, there's variation in the percentage of first home buyers in different regions and suburbs across the country.
"The highest proportion of sales to first home buyers is in West Auckland at 29%, closely followed by Porirua and Hutt City. South Auckland, Upper Hutt and Wellington City sit in the mid twenties, while North Shore, Hamilton, Rotorua, New Plymouth, Wanganui and Dunedin are all in the low twenties," said Ingerson.
"Of the main centres Tauranga (16%) and Christchurch (17%) are considerably lower. So too are the areas surrounding Christchurch as people have moved there either from Christchurch or from further afield to assist with the rebuild. Also at the low end of the scale are areas where people either retire to or have holiday homes such as Taupo, Kapiti, Nelson and Queenstown. And the lowest of all is Coromandel where only 6% of sales were to first home buyers."
And here's what Property IQ says about Auckland
One of the main reasons for the LVR caps was to slow down the increase in property values in Auckland. If we look at where first home buyers are purchasing in Auckland we can make some assessment of whether that will be successful. The accompanying map (you can view the map below) shows the relative number of first home buyers by suburb across Auckland. The dot on each suburb is sized based on the total number of sales in the suburb since the beginning of 2012, with a larger dot reflecting more sales and a smaller dot fewer sales. The colour of the dot represents the percentage of sales in that area that were to first home buyers. Red indicates it has an above average percentage of first home buyers, while blue reflects it being below average.
It is clear to see where first home buyers have been active, with fewer in the more expensive suburbs, such as central Auckland, and coastal North Shore. The suburbs with the highest percentage of first home buyers are in parts of North Shore, in suburbs such as Birkdale, Beach Haven and Bayview, then through Sunnyvale and Kelston in the west. These suburbs all have 35% to 39% of sales to first home buyers.
Others with over 30% of first home buyers are Glenfield, Glen Eden, Glendene, Massey, Avondale, Mangere East and Clendon Park. Glen Innes and Point England just to the east of central Auckland also have over 30% of first home buyers but they are smaller areas with fewer overall sales. Many of these areas with a higher percentage of first home buyers are also the same areas that have increased the most in value over the past year. The impact of LVR changes
So what impact may the LVR caps have on first home buyers in Auckland? One of the defining factors of the Auckland market at the moment is the high demand combined with low supply. This has meant multiple interested parties for each property many of who may have missed out on several previous properties. The question is how much impact the LVR caps will have on this. If there are multiple interested parties for each property, and the LVR caps remove some of these, there are still potentially several interested parties remaining.
Furthermore, the removal of first home buyers from the market opens opportunity for property investors. There are several ways that first home buyers are reacting to the changes. Some are choosing to stay out of the market for now and save more for a deposit, others are finding money from elsewhere, for example from parents, and others are resetting their expectations lower so don't need as much for a deposit.
Over the coming weeks and months, we will be measuring exactly what does happen to the number of first home buyers and whether investors become the perhaps unintended beneficiaries of this new policy. Furthermore we can do this for every transaction rather than relying on a survey of only a small number of buyers.
Below are Property IQ's figures showing the percentage of first home buyers by area since the beginning of 2012
23 Comments
"The suburbs with the highest percentage of first home buyers are in parts of North Shore, in suburbs such as Birkdale, Beach Haven and Bayview, then through Sunnyvale and Kelston in the west. These suburbs all have 35% to 39% of sales to first home buyers.
Others with over 30% of first home buyers are Glenfield, Glen Eden, Glendene, Massey, Avondale, Mangere East and Clendon Park. Glen Innes and Point England just to the east of central Auckland also have over 30% of first home buyers but they are smaller areas with fewer overall sales. Many of these areas with a higher percentage of first home buyers are also the same areas that have increased the most in value over the past year. The impact of LVR changes"
Possible with 2 people earning good salaries with maybe 10% deposit before the change. reversal of last years 20% price gains for all these suburbs I suspect as no investor would be interested with the yeilds available there
Simon, I've been looking around for suburbs that have capital growth potential in coming years, the ones that are rubbing shoulders with affluent areas are the obvious choice. I've noticed especially on the NS the suburbs of Beach haven and Birkdale, becoming in a word trendy. I guess a bit like the Point Chevalier or Northcote Point in their earlier days. So I think the FHB's in those areas have made a good choice. Not to dish out that there's anything wrong with West Auckland, or South Auckland.
Speaking of up and coming areas an interesting suburb to watch is Glen Innes. It's in a great spot, close to town, the waterfront, Auckland Uni and public transport. The state houses are being moved from some parts but being intensified in others. On paper it should be the next big thing but it remains stubbornly depressed. If you ask the older generation they'll tell you that GI has been the 'next big thing' for 30 years now but yet it remains ghetto.
Well the trick in building up value in any suburb is to have home occupiers (look for those area's when making your next purchase + plus the ones sitting next to their wealthier parent suburbs) , FHB have plenty of energy (more then most of us here), creativity, and most importantly they actively want to add value. They transform areas like you probably did in the day. If there's to many clusters of rentals, you're not going forward. Hence poor old GI and Pt England for that matter, plenty of potential, lovely areas, but too many rentals/state housing for my liking, they can overwhelm an area.
I think the point I was trying to make was the areas where FHBs have been the price setters over last 2 years are now very vulnerable due to the RBNZ lvr changes.
They've just lost all there customers.
Where as wealthier suburbs will still have their buyers, and rental popular suburbs, central auck etc will still attract investors for the yield.
The price is set by the marginal buyer, that is the buyer who is willing to pay the most, and in the case of auckland, willing to pay irrational prices that are not justified based on yield.
FHB's are the the price setter's, hence why wheeler refused to exempt them
Interesting story here about better off owning than renting . We have a Filipino bookeeper in the office and in August she came to me to ask for help in getting a mortgage for her daughter. I got hold of our Bank relationship manager and he opened a few doors .
Her 26 year old Daughter ( a maths teacher ) and son-in law ( a diesel mechanic ) have just bought a house jointly with another Filipino family with one child .
The two families are going to double - up in a 4 bed house with a small outhouse room in Mt Albert
The two famlies were paying $495 and $380 a week in rent , and having bought for $585,000. with Kiwibank mortgage and a 15% ??? deposit . ( Helped by the parents and in laws) .
Both couples work and the joint income is "around" $190,000.00 per annum which is about the average wage each .
Their mortgage, insurance and rates costs will be just over $270 a week for each family , a huge reduction in the outgoings when compared with the rent they were each paying .
Apparently , each family are going to chip another $150 a week to build a fund to acquire the next house .
This is not something I would even have contemplated in my 20's , but its clever , and LTVR rules have not stopped these first timers from buying .
Hang-on, aren't you saying it's cheaper to buy one house than to rent two? That's hardly surprising. You'll find it's even cheaper to buy one house than it is to rent three!
Good on them for being realistic and finding a way to get ahead though. Unlike that couple buying their first home in the hearld today. Complaining they had to borrow from the parents to get in. Why do a couple need a 3 bedroom house? Why not get a one bedroom flat, with no help from your parents, then upgrade in 5 years once you have kids on the way.
I had the same observation about that young couple - they're only 25 years old. Why do people think they need to buy a house before 30?
- Is it a Generation Y thing? Too lazy to wait and build a deposit?
- Or is it a FOMO thing? Prices are rising now and will therefore always rise, so we need to act now to afford a house?
25yrs old + 17 yrs pay off. => 40yrs at paydown point. (no point paying it off completely)
If you've got a reasonable stable position, and want to stay in the area (ties to community) who would want to fund a landlords property until they're 25??
What do you think it's going to cost for a dollars worth of solid equity?
Yeah, sounds like a real good idea, lets all divide our houses by the room and live communal – I will call it “Roach behavior” as they seem to do that. Holes in your example, are they insured ? What happens if one party falls sick and one party cannot keep up with their side of the bargain, marriage breakdown etc. This is the problem where “people” from other countries bring their mentalities here – and then all of sudden our quality of life goes down (and theirs goes up ) - big time. I see houses all over the shore with this technique of six families in one house – I got no problem with it – but pity the poor neighbors – especially those with the “20 cars parked” out side jamming up the common roads up - houses are designed for single “families” not multiple of families, infrastructure is based on common assumptions – one family, one house - two car spots etc. Im just trying to figure out what skillset your Filipino family came in under - was it the viticulture night classes course ?
"This is the problem where “people” from other countries bring their mentalities here"
That's exactly how my friends and I got our first house 15 years ago on incomes less than 1/10th of house cost. Now we all got our own houses. Not sure what skill set our familes got in under - it was 130 years ago.
Bob good on you and your friends for finding a 'loophole' and working hard to achieve your goals of owning your own homes. But as much as I admire your individual successes this is not solution I would want for the wider public. Slums, rat holes, roaches and third world living standards is what I think of if squeezing multiple families into houses designed for just one family becomes the accepted solution to the housing affordabilty problem.
You're quite the modernist. Completely depends on the house and the families don't it? Not everyone is 2 parents, 2 kids, 2 cars and can't share anything outside their own nuclear family.
We had all the space we needed for that stage of our lives - and friends right there. It certainly wasn't "..Slums, rat holes, roaches and third world living standards..." etc. - that house is $1.5M nowadays and it was great times.
Real surprising .. the number of FHB's in Beachhaven, Birkdale, Birkenhead, Glenfield .. those suburbs aren't exactly pakeha territory any more .. or even struggling beginners territory for that matter .. must be a lot of doubling-up double-deckers .. as serious says .. roach country
of course they can .. and most likely comprise the greater component of those stats .. the significance of which has been commented on before on interest.co.nz .. the provocative use of the emotional term FHB is corrupting the message .. there is a lot of sympathy for the FHB or what we all understand that to be .. and the recent arrivals, the blow-ins, and non-resident buyers are shirt-tailing on that sympathy, because they know it's a no-go topic
Just came from an auction for a property in in Mt Roskill, near the Grammar/Intermediate schools. 400 sq mt land, >60 yrs old house, about 70 sq mt, adjoined old state house, CV 360k (land 270k, improvements 90k), one fair sized BR, two tiny BRs and a very small kitchen...sold for 561k in under 30 minues. First/Other buyers well alive and kicking...
Here's Labour's Phil Twyford on the Kiwi dream under National;
The Kiwi dream of home ownership is turning into a nightmare under this Government, new census figures show, says Labour’s Housing spokesperson Phil Twyford.
"It is time National woke up. The home ownership rate has declined from 67 per cent in 2006 to 65 per cent last year. In Auckland it is down 2.4 per cent to 61 and in Gisborne it is below 60 per cent. The Kiwi dream of owning your own home is fading fast.
"The Government needs to step up, yet all Nick Smith seems inclined to do is wish the problem away.
"It is set to get much worse. LVR mortgage restrictions are shutting first home buyers out of the market and already cutting the supply of new builds.
"Meanwhile speculators are making huge tax-free gains and snapping up the houses first home buyers can no longer afford.
"In Government Labour will turn the home ownership dream back into reality. We will exempt first home buyers and certain regions from LVRs and clamp down on speculators through a capital gains tax and restrictions on overseas investors. We will also build 100,000 new affordable homes in a decade to fix supply.
"The Kiwi dream is turning into a nightmare. National needs to wake up and fix it," says Phil Twyford.
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