Buying a house

Future looking brighter for first home buyers

A report recently sent by QV has shown the property trends that we’ve become used to are finally starting to change. This could mean major things for first home buyers, especially those who live in large city centres. The key change reported is that housing is becoming more affordable for home buyers due to the following reasons:

Changes in growth rates or property

The most recent House Price Index created by QV has shown that the values of residential properties in March have increased by an average of 7.3% over the past year. This is the fastest annual rate since June 2017. However, when looking more specifically at where growth rates are changing, a lot is different from the past few years.

The growth increase has not been followed by most main city centres. In the past year, the average growth in Auckland has decreased from 12.3% to 1.0%, with similar trends occurring in Christchurch and Wellington. This same trend can be seen in smaller cities, such as Hamilton and Tauranga, though not to the same extent. The slowing of growth in these places is due to the high property prices – with the average house price in Auckland being $1,235,905, it’s no surprise that there is a slowed demand for housing.

In direct contrast, some regions have been found to have the highest growth rates – people living in the Hawkes Bay and Wairarapa regions have seen their properties grow in value between 24-26% over the past year, with house prices still being more affordable (house prices in Hastings are currently averaging at $497,562). It makes sense that investors and home buyers alike are increasingly searching for properties in these areas. These changes are good for first home buyers as it means that housing in larger cities is becoming more affordable, and buying in less populated regions will offer more capital growth opportunities.

Less investment properties

This decrease in growth is partially due to property investors. Many investors are finding it hard to scrape together the 35% deposit needed to purchase an investment property. This, combined with losing faith in the growth potential of the property market, has led to an increase in off-loading rentals rather than investing further in property. Developers are dropping prices to sell properties quicker to allow them to move onto their next development with the sale funds. Because of the decrease in investment properties, as well as the slowing market, the increased supply of housing means that buyers do not feel as much pressure to buy as soon as they can. This means that buyers are acting more reserved - on average, properties are taking 10 days longer to be sold – which is causing less upward pressure on house prices. This is ideal for first home buyers as not only have house prices dropped, but the decreased demand means that they can take their time when searching for a property and not feel pressured to purchase a property as soon as they see it.

Less bank restrictions

Recently, the mortgage restrictions set by the Reserve Bank on home buyers have been relaxed. A 20% deposit is usually needed for people to buy a property – however, banks are now able to offer more customers low-deposit home loans. ANZ and Westpac offer up to 90% lending to customers who meet certain requirements. This means it becomes easier for first home buyers to put their first foot on the property ladder.

The bottom line

These changes have caused an influx in the number of first home buyers in the market. There are many people that have never owned a home and believe that they won’t own one for a long time. However, due to these recent changes, it has become possible for those who weren’t previously able to purchase to now buy a property. As Milestone Direct offers free mortgage advice (often called mortgage broking), so if you are considering purchasing a new property, please get in touch with us: