New Zealand’s house price slump has given first-time homebuyers a welcomed leg up in their quest to purchase a property, but it may be a short-lived opportunity.
For a certain segment of the nation’s would-be homeowners — those armed with sizable deposits and solid incomes — 2023 has been a heartening year, with first-time buyers grabbing a record 26% share of the market in the third quarter, according to CoreLogic New Zealand. While an 18% fall in house prices between November 2021 and May this year made homeownership more obtainable, also working in their favor has been strong wage growth, a possible peak in interest rates, an easing of lending rules and government policy changes.
“This is a window of opportunity,” said independent New Zealand economist Tony Alexander. “This is good as it gets.” But Alexander has further words of caution for those looking to get on the housing ladder: The clock is ticking.
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Kiwi First Time Buyers Getting A [Brief?] Look-In?
“the point of the estimates is that the various caps on the scheme (10,000 loan cap, income and house prices) are likely to be the binding constraint on the amount of loans provided rather than the scheme’s equity funding”.
To provide some context:
Based on ABS numbers, in the year to February there were 110,000 loans to first home buyers. The average loan size in February to FHB was $337,412. Usual caveats apply to these data.
Using the average loan size to FHB and assuming the scheme covers 15 per cent, the government will guarantee around $50,000 per loan. If the scheme has $500 million in funding, this implies
– 9,879 loans if the scheme holds reserves covering 100 per cent of its commitments. – 49,395 loans with 20 per cent reserves. – 98,790 loans with 10 per cent reserves. – 197,583 loans with 5 per cent reserves.
Average loan size data are biased downwards, so can use average house prices instead as arguably an upper bound. In the December quarter ABS average house prices were $650,000. 15 per cent of this is $97,500.
– 5,128 loans if the scheme holds reserves covering 100 per cent of its commitments. – 25,641 loans with 20 per cent reserves. – 51,282 loans with 10 per cent reserves. – 102,564 loans with 5 per cent reserves.
In The Business tonight there was a segment on the issue of making super accessible to facilitate first time buyers entry into the housing market. Something which today the Government has ruled out, killing off recent speculation. We feature in the segment.
The super industry has launched an unprecedented advertising attack against the big banks likening them to foxes in a hen-house. It comes as a debate rages about an idea to allow first home buyers to use retirement savings for a house deposit.
