Early signs of first home buyers heading back to the housing market are evident in recent figures* from the Reserve Bank of New Zealand, which show a 6.6 per cent increase in the number of mortgages approved for first home buyers in April 2023. This is the second month in a row that first home buyer approvals have risen, with further increases likely following the RBNZ’s easing of LVRs and the continued lower-priced market. We’ve got some tips to help first home buyers prepare to buy property in 2023.
Larger market share
Despite the ongoing affordability pressures, tight lending conditions, and higher mortgage interest rates, first home buyers have continued to hold a record high market share over the past two quarters, according to CoreLogic’s latest First Home Buyer report.
CoreLogic NZ Chief Property Economist Kelvin Davidson said the current market conditions were impacting all buyer groups, but that first home buyers had ‘held on’ relatively well by making the most of weaker conditions.
“There are many potential reasons for the relative strength of FHBs (first home buyers), but key ones are likely to include using KiwiSaver for all or part of their deposit, a willingness to compromise on the type and/or location of a property, and making use of the low deposit lending quotas at the banks,” Mr Davidson said.
“The wider downturn in values and relatively high stock of listings on the market has also helped finance approved FHBs, and brought a wider range of properties back onto their radar.”
All six national areas reflect the trend of higher-than-average market share for first home buyers.
"It's been a solid three to six months lately for FHBs, as they've enjoyed plenty of choice amongst the existing stock of properties listed for sale, falling prices, and reduced competition from other buyer groups such as mortgaged investors," Davidson said.
"Looking ahead, even if the downturn in prices does end in the second half of this year, we doubt that the market is going to boom again straightaway - especially if caps on debt-to-income ratios are imposed in March or April next year, which now looks almost certain.
"In other words, FHBs should continue to see relatively favourable conditions for a while yet, albeit mortgage rates seem unlikely to suddenly fall sharply anytime soon."
Preparing to buy
Now may be the best time for first home buyers to step onto the property ladder, before house prices potentially begin climbing again. Once inflation is under control and interest rates start dropping, buyer interest is likely to return to the market and drive-up house prices once more.
First home buyers looking to buy a first home to stay in for a while could benefit from buying now while there are still many listings and few investors to compete with. Vendors are increasingly likely to negotiate, while the lack of competition could also mean a better range of choice than what has previously been available for first home buyers.
Provided you can afford the higher interest rates for the foreseeable future, with the view that these could start easing in 2024, buying a first home in 2023 may be the right option. The key to success is being realistic and possibly lowering expectations. That could mean compromising on your dream home in your preferred location by buying a smaller first home or buying in an area where values are slightly lower.
If you decide to take the leap, here are some things you can do, starting now, to prepare:
- Get to know the process – the more you know, the less overwhelming it will feel. Talk to a family member or friend who has recently bought a home, or contact a mortgage adviser to get advice and guidance.
- Get pre-approved finance – with LVRs easing, banks will be extending more lending to lower-deposit borrowers. This may be your opportunity to buy now with a slightly lower deposit.
- Do your homework – start researching listings to get an idea of how close to CV properties are selling. Check and compare properties that have sold in the area you’re considering. Go to open homes and auctions so you have a frame of reference.
Working with a Mortgage Express branded mortgage adviser means you’ll have a team on your side who can help you secure pre-approval from the right lender, negotiate on interest rates and finance terms, and guide you through the often complicated processes of buying a first home.
If you’d like to find out more about buying a first home, contact Mortgage Express today to connect with a mortgage adviser in your area.
