First-home buyer activity takes tumble

First-home buyers have been the hardest hit by the slowing market with their share of purchases falling to 22.5% in the first quarter of this year, a property researcher says.

That was higher than the longterm average of 21.8%, but down sharply from the record level of 26% at the end of 2021, CoreLogic’s latest First Home Buyer report says.

The report also showed the proportion of first-home buyers in the market over the same period had fallen to 2017 levels, while the number of purchases they made was at the lowest level since 2014.

In the wider Wellington region, which included Lower Hutt, Upper Hutt and Porirua, they still accounted for over 30% of activity. That was 2 percentage points higher than the area’s longterm average.

First-home buyers market share in Dunedin (25%), Hamilton (25%) and Christchurch (26%) was also above the average, while in Auckland (25%) it was back to normal and in Tauranga (16%) it was just under average.

But the drop in first-home buyers market share occurred at the same time as total sales volumes had also fallen.

CoreLogic chief property economist Kelvin Davidson said that although the market had turned, first-home buyers had not been in a position to take advantage of weaker prices and less competition. Some aspiring homebuyers might have willingly pulled back from the market with the intention of trying to enter the market at a lower purchase price later, he said.

‘‘But we suspect that’s only a small part of the explanation. It’s more likely their market share has fallen on the back of the tighter credit environment and the increased cost of servicing a mortgage.

‘‘While most mortgage holders are feeling the sharp rise in mortgage rates, it is first-home buyers who have been most impacted by the broader credit crunch.’’

The tightening of lending criteria, due to the reintroduced loan-to-value ratios and the Credit Contracts and Consumer Finance Act (CCFA) rules, had bitten hard for those with low deposits or less disposable income, Davidson said.

Housing affordability was also stretched throughout the country, with the average deposit taking more than 11.5 years to save. In Tauranga and Auckland it took even longer, at 15.8 and 13.5 years respectively.

The market was likely to remain tough for first-timers for some time, with the LVRs here to stay for the time being and mortgage rates still rising, Davidson said.