First home buyers' activity in the housing market continues increasing, with the numbers of them making a purchase, the amount they are borrowing and the estimated prices they are paying, all on the rise.
According to the latest Reserve Bank data, the number of first home buyers taking out mortgages increased for the third consecutive month in October to 2765. That's the most in any month since November last year.
The amount they are paying for a home is also slowly but steadily on the rise. Interest.co.nz's estimated average first home buyer price has risen for three consecutive months, from $654,601 in July to $673,349 in October.
But that remains down by almost $44,000 from the record average of $717,724 first home buyers are estimated to have paid for a home in April 2022.
Unsurprisingly, the average size of the mortgages they have been taking out has also been rising.
According to Reserve Bank figures, the average size of the mortgages approved to first home buyers has increased for three consecutive months, from $547,813 in July to $565,280 in October.
However, that's also down from the May 2022 peak of $595,398.
One figure that is not rising is the number of low equity mortgages being approved for first home buyers.
Low equity lending, where the borrower has less than a 20% deposit for a home, increased steadily for most of this year, rising from 28.9% of mortgage approvals to first home buyers in December last year to 38.4% in August this year.
But that dropped back to 37.7% in September and 37.3% in October.
The current round of interest rate cuts, with more expected in the New Year, should help first home buyers maintain their current momentum in the market, although, as always, that will be moderated by the extent to which lower interest rates are offset by any rises in house prices and by employment levels and concerns over job security.
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76 Comments
whooo hoooo - go FHB, nothing makes me happier than people getting into their own homes - true comment
Especially 58 year olds using ALL there KiwiSaver. Woo hoo
@IT GUy- we dont know there circumstances - they could have preferred to travel far and wide spend money on things that had meaning to them - now property has meaning and they bought it - your property jealousy is a window into your soul IT:)
The projection of jealousy and envy here by a few, is an interesting condition.
https://www.oneroof.co.nz/news/couple-aged-58-empty-their-kiwisaver-to-…
So over the next 25 years, at a 6.0% p.a mortgage interest rate, total payments for accommodation are estimated to be $1,565,373.
1) if they need to downsize or move after 25 years, what could the sale price be? This amount might be required to meet aged care costs.
2) could this total payment amount over the next 25 years be used in another way that would result in an amount above the sale price of the residential dwelling in 25 years?
Here are some excerpts from the article referenced above:
Gary said it worked out to be a little more expensive than renting, but it was worth it to have their own asset.
“We are paying more now, but we are paying off a mortgage. The dollars are benefitting us.”
“But if you’ve got your own home, it is a lot easier to survive later on in life than if you’re still renting,” Gary said.
Yea, the whole idea (from the financial sense) of buying your own home is so that you can pay it off before you retire and then live in it rent-free when you are retired.
Buying a home when you are relatively close to retirement seems counter intuitive especially if your mortgage payments are more expensive then your rent would have been. Instead of paying rent to the landlord, now you have to pay rent (interest payments) to the Bank and on top of that you are now the one who has to pay for maintenance, rates, insurance, etc.
The joy of living in your own home might be worth the expense though.
It's all a relatively new narrative though.
You only have to go back to when "boomers" were buying their first homes to see the difference in the narratives. They bought homes for their family. They were able to repay the mortgage much earlier, thereby freeing up disposal income for retirement savings. The addition of the 2nd income earner was a bonus, not a necessity, and there was no inkling of capital gains. It was not the MO.
Blue collar workers could get into a first home relatively easily. There was no real rent vs mortgage, opportunity cost, being rent free in your own home, or property ladder. Bigger homes were a function of growing children.
Then the financial industry and monetary economics took over. Now it's all simply financial speculation.
And now we have the precarious situation where few of these who benefitted from such lovely economic conditions and affordability, wish to support anything that could help bring society back to something more harmonious and family focused, as it comes at the cost of them makin more in capital gains for their retirement vs allowing the youth to have similar opportunities.
The joy of your own home is one thing but the main benefit is that in 5, 10, 15 years time even if you never touched the principal your repayments would be far less than what your market rent would be.
Repayments will always reduce relative to rent over time.
I don't think so. Run your numbers and you'll see that once you take into account all the costs associated with owning a home plus interest/principal you'll need to pay to the bank over 25 years, renting will likely be cheaper (presuming rental inflation will be around 1-3%p/a over that period).
"Repayments will always reduce relative to rent over time.
This might not be so in the the scenario you've suggested where the buyer chooses the "interest only payment" mortgage, since no principal is being paid down to reduce the amount you are paying interest on.
Does that take into account the home owner choosing to increase their repayments by 1 - 3% p.a. in line with the rental inflation? Shortening the loan term by 5 - 10 years makes a big difference to the numbers.
A 25 year mortgage is not the minimum length of the mortgage.
Are you seriously trying to tell us that in 15 years for example, the rent will be cheaper than paying interest only on a mortgage you drew down today? No quite simply no.
Also principal is not a cost it’s effectively forced savings so you do not include that in your costs vs rent. I am sorry but your argument is deeply flawed.
Based on what parameters / assumptions?
Divorced males, having to start again would be a fare percentage 🫢
Is this the best a peak market can muster?
This is pathetic, next year really is gonna hurt…..
Don't be fooled by market noise FHB’s there’s still a lot of economic clean up to occur before the landmines are defused.
Correct me if I'm wrong but the peak tends to be February-March each year. Its pretty obvious that FHB can see mortgage rates trending down and house prices trending up.
Past performance is not a reliable indicator of future performance
Just look at Steve Smith and Marnus
"Past performance is not a reliable indicator of future performance"
True, absolute and perfect knowledge of the future is better… But we don't have that ITG, that's why all of us, you included, base our decisions about the future, from our experiences of the past.
Your quote is just a lazy disclaimer from financial institutions to cover their arses.
The past can indicate and inform what the future *might* be, but its reliability varies. And I would suggest in a more volatile and uncertain world, the reliability of the past as an indicator of the future is lessening.
If we look at property, the past indicates that property values rise over time, and typically by quite a lot. Yet there are so many different conditions at this juncture, compared to say 2014, that one would need to be very cautious about assuming prices will be at least double what they are now in 2034.
My best guess is that - based on past trends AND current conditions AND likely future conditions - property will be higher than it is now, in 2034. But not double. Perhaps 50% higher. But that’s a total guess
"If we look at property, the past indicates that property values rise over time, and typically by quite a lot. "
A case study:
For the 36 year period from 1955 to 1991, nominal house prices grew at a rate of 13.1% per annum. A house price trend extrapolator may have expected this historical rate of house price growth to continue into the future. Or being "conservative", they may have used a annual rate of growth of say 8% p.a (5 percentage points below the 36 year historical average, 39% lower than the 36 year historical average)
What was the actual nominal house price growth for the following 33 year period from 1991 to 2024? (-0.8% p.a for 33 years)
https://fred.stlouisfed.org/series/QJPN628BIS
A reminder for price extrapolators of the general investment warning: Past performance is no guarantee to future returns.
People are free to choose to ignore the general investment warning, however people are not free to choose the consequences of their choice.
Remember that the purchase of a residential dwelling for owner occupiers is likely to be the largest purchase for the household. For first home buyers, the purchase price could be 500 - 1000% of their entire net worth and lifetime savings (due to 80 - 90% LVR mortgage).
Time periods for real estate market prices (nominal) that are yet to recover to peak price levels in some residential real estate markets:
1) Japan: 33 years and still counting (peaked in 1991)
2) Russia: 18 years and still counting (peaked in 2006)
3) Kazakhstan: 17 years and still counting (peaked in 2007)
4) Cyprus: 16 years and still counting (peaked in 2008)
5) Spain: 16 years and still counting (peaked in 2008)
6) Italy: 13 years and still counting (peaked in 2011)
7) Saudi Arabia: 10 years and still counting (peaked in 2014)
8) Qatar: 9 years and still counting (peaked in 2015)
9) Macau: 6 years and still counting (peaked in 2018)
10) Hong Kong: 5 years and still counting (peaked in 2019)
Good correction there for your "over 5000 FHB every month buying", it's 2765 for October so you have some actual data now, not your reckons.
Doesn't matter if its only 1000, that's still a huge number every month still buying houses. Kind of weird how some people cannot be happy about others getting on with their lives and into a new home.
Bullshit, you couldn’t care less about FHB’s.
All you want is lemmings to float your leverage.
Spare us Ghandi.
Wow at least 26 sad individuals on this site and still counting.
Lol they're just calling it as they see it.
Sometimes the truth hurts. Those in self denial are the first to call others jealous, envious and sad.
This site is almost always 80% plus of renters who want to buy telling us all everyday how overvalued property is, how renting is a much better a more cost effective option and how the market is certain to price back down to 3x earnings as everyone has the right to buy a home. It’s honestly been that way for 10 years or more. Then they end up buying and disappear.
Right so its kind of a Shamubeel Eaqub Syndrome or SES.
2765 I think is the number of purchases that are FHB - many of those will be couples; so 5000 people possibly accurate
All those really educated FHBs listening to the property spruiking media who can't tell the difference between a freehold and a crosslease property.
Crosslease is better these days. Neighbour can not squeeze in as many 3 level townhouses on your shared driveway as they can get away with.
"Is this the best a peak market can muster?"
How do you know it's "the peak of the market" ?
Because the RE industry, bank economists and RBNZ keep saying it is.
Not true, the RBNZ just said they expected a 7% rise in house prices in 2025. (I'm not saying I agree with their forecast).
Also I doubt the RE industry is saying the RE market is going downhill from now on.
My bad, I misread it as the peak trough.
Reviewed the RBNZ data (hc31.xlsx):
- Total borrowers from May–Oct 2021: 144,262
- Total borrowers from May–Oct 2024: 103,816
- A 28% decrease in borrowers over this period.
25% decrease in total borrowers compared to May–Oct 2019: 140,080
26% decrease in total borrowers compared to May–Oct 2018: 141,915
26% decrease in total borrowers compared to May–Oct 2017: 141,226
So, did 2020, 2022 and 2023 not exist ?
May–Oct 2020: 137,881
May–Oct 2022: 90,681
May–Oct 2023: 91,212
Since peak, borrowing hasn't quite reached the pre-pandemic level of ~140,000 total borrowers, activity remains sluggish.
Thanks
Listings have more then recovered......
Shouldn't it be much higher than pre-pandemic?
- We've imported shed loads of people.
- Apparently people were holding off until interest rates came down and they have
- Apparently pent-up demand was like a pressure cooker just waiting to explode this spring
Where is the flood of buyers?
Confusing.
Looking at total borrowers over 12 months (Oct–Oct) instead of 6 (May–Oct):
- 2015: 356k
- 2016: 396k
- 2017: 274k
- 2018: 274k
- 2019: 273k
- 2020: 260k
- 2021: 300k
- 2022: 193k
- 2023: 171k
- 2024: 193k
Fewer borrowers year by year, and they’re taking on larger loans (though I haven’t included those details here).
From May to October, 2022 (50k fewer), 2023 (50k fewer), and 2024 (40k fewer) combined have 140k fewer borrowers than usual. That's a lot of catching up to do!
Supply up 26% on October 2023.... up 9% month on month... according to this article ... "growth in the average asking price between September and October." ... So folk have taken to asking more ... Are they actually getting it?
"The Index uses an “80 per cent truncated mean” of the "expected sale price" to calculate the average asking price. This excludes the upper and lower 10 per cent of listings by price, and averages the expected sale prices of the remaining properties."....
Let the buyer decide .... certainly plenty of listings too choose from... lets see how long the candle burns for....lol
https://auckland.scoop.co.nz/2024/11/house-prices-gain-momentum-and-auc… (Scoop)
"So folk have taken to asking more ... Are they actually getting it? … let the buyer decide."
I don't know, but the title's article above says:
More first home buyers are purchasing a home of their own and they're paying more for them and borrowing more
So, I would presume that the answer to your question is "yes, the buyers have decided to pay more"
A quick calculation tells me in the last quarter, the FHBs only needed to save an additional $2000 to make the higher purchase price. The question is not so much what they are paying, but what they are buying. Just perhaps, maybe, they've held on, saved a little more, and purchased that slightly nicer property instead of an old rotbox.
Well its a given that 37% of them (Low equity) 'had' too pay more....lol ... Is it possible that 37% is distorting the numbers somewhat?.. early days... go forth and multiply ... the bank is your friend....lol
Dumb money sliding in, unfortunately.
Good news for FHB, still the DGM community here running them down for it. It's weird they advocate for more affordable housing for FHB but when that happens they are against it.
I think there's some alternate motive amongst them
Jealously, the worst of all human traits.
Just incredible the number of negative and pissed off people on this site.
There is an alternate motive, misery loves company.
"Good news for FHB, still the DGM community here running them down for it. It's weird they advocate for more affordable housing for FHB but when that happens they are against it"
People can see that many locations have properties where it is still cheaper to rent than buy. Each person should do their own calculations based on their situation.
Ask all the young kiwis in Straya seeking a better debt to income balance. Affordability is in the eye of the speculator.
What other options do you have,
1) live with your parents
2) live in a car
3) rent and pay $600-700 per week
You are totally correct.
Too many on here are not prepared to do anything except moan about the price of housing in NZ when in reality if they looked outside their negative thoughts and got alongside people who have done well financially out of investing, they would be far better off.
I can not see how so many on here are an actual cross section of the New Zealand population, as if it was we are in big trouble..
This site is meant to be here to assist people make financial decisions and yet so many are not investors of anything unfortunately
Horribly one sided on here. FHB and people just getting on with it if they were all on here would outnumber the DGM's 100 to 1.
"This site is meant to be here to assist people make financial decisions and yet so many are not investors of anything unfortunately"
1) Most people are not property industry specialists like yourself. Many people want to live in a ready to live residential property and do not want to buy a property that needs work - renovation, cleanup, add another room, etc as they are already busy with their lives and have no interest in spending time renovating their residential real estate. These buyers have no idea about property prices and buy at market prices (& not under value)
2) Real estate is not the only asset class for investors. Many investors only specialise in real estate and no other asset class - this is the lens which they view "investing".
3) Many commentators here invest in asset classes beyond residential real estate. They are comfortable with asset classes beyond real estate. They know their opportunity cost. The finanancially illterate are unaware of their opportunity cost.
4) a very small number of people in NZ were able to see the house price risks in Nov 2021. Most of the people in NZ couldn't see those risks and were willing to pay high prices because property prices had not fallen significantly in their lived experience, they believed that house prices double every 10 years, & believed that residential real estate was a no risk investment and buyers couldn’t lose. This led to a fear of missing out.
Each person needs to do their own calculations for their own situation (and opportunity cost) to decide whether they should buy or rent. There are some conditions where it is better to buy and other conditions where it is better to rent.
CAVEAT EMPTOR
It is cheaper to rent than buy to own at the moment without doubt.
However if you want to be renting when you retire then you are going to be in major strife financially.
I can guarantee that if you buy right, improve a property without going over the top and rinse snd repeat, you will end up a heck of a better position financially thsn by doing nothing remaining renting.
I believe that most of the younger ones are just not prepared to put in the yards that are required.
"I can guarantee that if you buy right, improve a property without going over the top and rinse snd repeat, you will end up a heck of a better position financially thsn by doing nothing remaining renting."
That is going into the property business. Just because that is your area of interest, it doesn't mean that others are interested in that activity.
Most owner occupier buyers have no interest in going into the property business. They could be doctors, lawyers, business executives and other highly paid professionals who have more urgent needs for their time. Imagine you need emergency services (fire, ambulance, police, A&E doctor, etc) and your service provider gets a call regarding their latest property renovation and takes that call, instead of being focused on providing you your service and attending to your urgent and life threatening needs.
A entrepreneur may tell others that they should get into their business line, but most have no interest.
"However if you want to be renting when you retire then you are going to be in major strife financially."
It depends on the opportunity cost.
I know someone who sold their home, invested the proceeds elsewhere, and rented. That investment went up multiples of their investment amount within a few short years. They could now repurchase their previous property for cash, mortgage free and still have lots of money leftover.
They took their entire family on a world wide trip for a few years.
Except there could be tax to pay if you have a history of doing that.
You really do epitomise the typical smooth brain kiwi “investor”. Doesn’t understand any other way to earn money outside of title squatting.
It’s great you earn money from it like many kiwis, but its also a classic example of how thick we’ve become as a population.
Heaven forbid we invest in stocks or dare I say build a real business without the bank holding our infantile hands the whole way lol
Kiwi ingenuity died long ago, and our dumb populace is losing the primary investment vehicle that made them rich the first place.
100%. Thinks that we can all somehow get rich by selling houses backwards and forwards to one another. And all of these clowns above truly could not care less about the first home buyers getting into these homes, as long as they are doing it. Too bad if it means financially ruining themselves (forgetting how easy they had it on a single income).
Of course I care about first home buyers.
All of my kids have unencumbered homes, I can guarantee that I do not stop other people from buying!
Prey tell how buying snd selling and investing in stocks is helping business?
Property investors do a lot more for than the economy than share investors
For a young person, live with your parents and knock out your mortgage as house prices stagnate or rent easily in the saturated rental market.
Theres certainly more than 3 options .... lol
"Theres certainly more than 3 options"
Here's one that the original commenter was unable to see:
1. rent and pay $600-700 per week AND
2. Save $30,000 per year difference between renting and buying (mortgage payments, rates, insurance, maintenance) AND
3. invest the 20% deposit that would be used to buy the house and the annual savings in a higher returning investment.
Not pragmatic at all.
1. $600-700 per week is a pretty low standard rental.
2. No. You are including principal repayments which are not a cost. Principal payments are effective savings.
3. Your 20% deposit will not achieve remotely close to the gain on the leverage of your property even if it’s only 5% over the next few ( 5 years for example.
Have you done the calculations? Only when you do the calculations can you see.
There is a rate of return on the cash where it is far more beneficial to rent rather than buy.
There is also another key factor that influences the decision.
It is the interplay between these 2 key variables.
Most people believe that people should buy under ALL conditions. That is simply untrue. There are conditions where it is better to buy, there are conditions where it is better to rent.
Do the calculations on this property currently listed for sale - is it better financially to rent or buy? and why?
https://homes.co.nz/address/auckland/orakei/34-apihai-street/8ZnZj
Here are some numbers that you may not see:
1) total estimated cost to buy - assuming 80% LVR, 6.0% p.a 30 year mortgage P&I, with rates, insurance, maintenance increasing 2.0% per annum is $3,127,385
2) total estimated cost to rent for 30 years assuming 3.0% p.a increases is $2,226,529.
3) so over the 30 year period, the renter can save the difference of $900,855 to invest in a higher returning investment. The rate of return on the investment could be much higher than future house price growth and the total invested amount could be higher than the future price of the house in 30 years time.
4) in year one of rent vs buy:
a) the buyer pays a deposit of $286,000 deposit and pays $91,690 ( P&I mortgage, rates, insurance, rates and maintenance)
b) the renter pays $46,800 for rent. The renter can save $44,890 ($91,960 paid by owner buyer less $46,800 rent) as well as the $286,000 deposit and invest it.
"Your 20% deposit will not achieve remotely close to the gain on the leverage of your property even if it’s only 5% over the next few ( 5 years for example."
There is an inherent assumption here. That may prove to be incorrect.
For those owner occupier buyers who don't realise, the financial consequences of a Peaker and "Buyer Today".
1) Peaker
The median house price at the peak for Auckland was $1,300,000
With an 80% LVR, this is a mortgage of $1,040,000
The 20% equity is $260,000
2) Buyer Today ("BT") - Sept 2024
In 2021, the buyer who waited, deposited the same $260,000 equity into a bank deposit earning interest. Also BT would rent an equivalent house and have still saved money due to the rental being below the monthly P&I mortgage payments of Peaker - in 3 years the savings would have been about $20,000 annually. So a Buyer Today would have an amount of $340,233 to use as a deposit.
The current median house price for Auckland is around $950,000
Equity deposit of $340,233
The mortgage at this purchase price would be $609,767 (an LVR of 64%)
The Peaker has a mortgage which is higher by $430,233 (mortgage of $1,040,000 for Peaker vs $609,767 for BT). BT's mortgage is 41% lower than Peaker's mortgage.
Assuming BT, pays the same exact dollar amount each year that Peaker pays for their mortgage, as a result of that additional borrowing, Peaker is paying $1,232,229 more over the 30 years than BT (This is due to higher borrowing amount of $430,233, and total interest on this of $801,996 over 30 years). BT is mortgage free by the year 2037, whilst Peaker continues to pay their mortgage until 2051 (14 years later) - so after the year 2037, BT can save all that money that Peaker continues to pay on the P&I mortgage.
Assuming same incomes, and same living costs (food, travel, etc except mortgage) , BT can save the total $1,232,229 in payments that Peaker is paying. If BT invests the annual P&I payments that Peaker continues to pay after the year 2037 at 4.0% p.a, then in 2051 this amount will grow to $1,401,500.
Remember that at the end of 30 years, the house price will be EXACTLY THE SAME for Peaker and BT.
BT will have more money available for retirement than Peaker. Conversely, Peaker will have less money than BT at retirement.
That single decision to buy in November 2021 would have cost $1,232,229 extra to buy the exact same house for Peaker compared to a Buyer Today.
Note the equity positions as at Sept 2024 also:
1) Peaker: NEGATIVE $90,000 (negative equity, assuming interest only - house price of $950,000 vs mortgage of $1,040,000) - a loss of over 130% of their initial equity (and likely life time of savings).
2) Buyer Today: $340,233
Owner occupier buyers: CAVEAT EMPTOR
This guy might not have realised it then, but being rejected from the bank was actually a blessing in disguise. Being rejected is better than getting approved to overpay for a house.
https://www.newshub.co.nz/home/money/2021/11/first-home-buyer-not-very-…
Instead of being a "Peaker", he can be a "Buyer Today"
What is a house worth?
Are FHB paying too much? Perhaps bought into the hype agents are spinning? Prices have been sliding (according to Core Logic) but FHB are paying more??
For first home buyers and other owner occupier buyers:
1) The bullish case for house prices
https://www.oneroof.co.nz/news/the-kiwi-economist-whos-putting-his-mone…
2) The bearish case for house prices:
https://www.oneroof.co.nz/news/latest-news/six-reasons-you-shouldnt-buy…
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