First home buyers now have a record share of the property market, according to a new report from property analyst firm CoreLogic.
CoreLogic senior property economist Kelvin Davidson says people are managing to buy their first property by compromising on location and type of property. Photo: RNZ / Nate McKinnon
The report shows for 2020 to date, first home buyers now make up 24 percent of the market share, up from an average share of 21 percent, and a previous peak more than a decade ago of 23 percent.
CoreLogic senior property economist Kelvin Davidson said while it was still tough for first home buyers, the report proved many were still finding a way in.
"It's not easy, it never has been easy but what it's showing is there's still an appetite there to get into the market to get onto the property ladder and that market share is a record high.
"Despite all the challenges that are there, first home buyers are clearly still pretty keen to buy."
He said many were using their KiwiSaver to pull together the deposit, as well as compromising on location and type of property.
"As to the types of dwellings [first home buyers] are purchasing, houses have been the dominant category this year, accounting for 78 percent of all their purchases, higher than the house share across all buyers of 73 percent. Flats have also been slightly more important at 14 percent.
"For comparison, in 2019 as a whole, houses accounted for 80 percent of first home buyer purchases and flats were 12 percent - so this year has seen a slight shift in preferences towards smaller dwellings."
Davidson said first home buyers were also entering the market at a higher point than might be expected.
"So far this year, first home buyers have paid a median price of $565,000, which is a bit below the median for all buyers, but it's a lot higher than the lower quartile price for all buyers.
"That lower quartile price is where the bottom 25 percent of properties come in and there is this perception that that's where first home buyers would be trading... but they're actually about $130,000 above that bottom tier."
He said in some parts of the country, based on prices paid by first home buyers, servicing a mortgage cost less than paying rent.
"Dunedin and Tauranga for example... and across the country as a whole it's about $50 a fortnight more to pay a mortgage than to pay the rent.
"Home ownership comes with other costs of course, like rates and maintenance, but there is pretty clear financial incentive from those figures for people to get into [a house] particularly somewhere like Dunedin where servicing the debt on those mortgages is cheaper than paying rent."
He said despite the data showing a strong stream of first home buyers in the market, compared with other buyers, it did not account for those first home buyers who were unsuccessful.
"What we don't know and what we'll never know is how many are missing out. We know that over time home ownership rates have fallen... so we're only picking up in this report on people who have been successful.
"The big thing is keeping up the high rate of construction that we've got now... and I think that's the solution - just build more properties."