Report highlights robust activity throughout 2024 so far
Low deposit mortgages are helping first-home buyers (FHBs) maintain a strong presence in New Zealand’s property market, according to CoreLogic’s August Housing Chart Pack. Despite ongoing affordability challenges, the share of property purchases by FHBs rose to 27% in July, up from 26% in the second quarter, surpassing the long-term average of 21%.
Kelvin Davidson (pictured), chief property economist at CoreLogic New Zealand, attributed the rise in FHB activity to the banks’ increased allowances for low deposit lending. “Given the recent loosening in the loan-to-value ratio rules, it’s interesting to see that FHBs currently absorb 75% to 80% of banks’ overall allowance for low deposit lending to owner-occupiers,” Davidson said. “Put another way, two in every five FHBs get into the property market with less than a 20 per cent deposit, and the RBNZ’s (Reserve Bank of New Zealand) rate-cutting cycle is likely to reinforce their presence.”
Robust activity since the start of the year
FHB activity has remained robust throughout 2024, according to a news release. From January to July, FHBs purchased over 11,000 properties, up from around 9,400 during the same period last year. This increase comes amid elevated housing stock levels, which have given buyers, including FHBs, more options and eased pressure on prices.
Davidson said that available listings are around 25% higher than at the same time last year. “Many buyers can probably get a cheaper price and a better house than they thought,” he said.
The rise in listings has coincided with a notable loss of momentum in property values across the country. Wellington has seen the steepest decline, with values down 21% from their peak, while Christchurch, where FHBs have a higher market share at 28%, recorded a smaller decline of 7.1%.
Looking ahead, Davidson suggested that inflation’s downward trend toward the Reserve Bank’s 1% to 3% target could lead to a reduction in mortgage rates, potentially dropping to around 5.5% by the end of 2025. However, he cautioned against expecting another property boom, citing ongoing economic challenges.
“Undoubtedly, the major turning point for mortgage rates is here, and that will be a support for housing. But a fresh boom doesn’t seem likely when jobs are being lost, and the economy remains in recession.”
Trends in residential real estate
The August Housing Chart Pack also revealed key trends in New Zealand’s residential real estate market. The total market value stands at $1.62 trillion, with property values edging up 2.9% in the year to July, driven by a short burst of growth in late 2023 and early 2024. However, the market has since cooled, with values falling by 1.9% in the three months to July.
Sales volumes showed signs of recovery, increasing by 14% year-over-year in July, although they remain below the long-term average. Rental growth has also slowed, with national growth at 2.5% in the year to July. Gross rental yields have risen to 3.8%, the highest since mid-2016, but still below term deposit rates.
As 64% of New Zealand’s existing mortgages are set to reprice within the next 12 months, borrowers are expected to benefit from reduced borrowing costs, providing further support to the housing market in the near term.
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