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First Home Buyers Seize Opportunities Amid Shifting Market Conditions in New Zealand


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As the New Zealand property market navigates uncertain economic waters, first home buyers (FHBs) are seizing the opportunity, despite affordability challenges. CoreLogic's August Housing Chart Pack reveals that FHBs accounted for 27% of all property purchases in July, a notable increase from the previous quarter's 26% and well above the long-term average of 21%.


This surge is largely attributed to the recent loosening of loan-to-value ratio (LVR) rules, which has allowed banks to offer more low-deposit lending options. According to CoreLogic NZ's chief property economist, Kelvin Davidson, 75-80% of the low-deposit loans issued to owner-occupiers are now being taken up by FHBs. This has enabled about two in every five FHBs to enter the market with less than a 20% deposit, a significant shift that is further reinforced by the Reserve Bank's ongoing rate-cutting cycle.


With property values losing momentum and inflation trending back towards the 1-3% target band, mortgage rates are expected to drop to around 5.5% by the end of 2025. This scenario is providing a glimmer of hope for FHBs, who now have more choices due to an increase in available listings, up by 25% compared to last year. This higher inventory is putting downward pressure on prices, allowing buyers to secure better deals.


However, the market isn't without its challenges. Despite the potential for lower mortgage rates, the broader economic context, including job losses and a lingering recession, suggests that a fresh property boom is unlikely. In Wellington, property values have plummeted by 21%, the largest decline among major centres, while Christchurch has seen a smaller dip of 7.1%, with FHBs there accounting for 28% of property purchases.


Overall, while the current environment is opening doors for FHBs, the long-term outlook remains cautious. The economic landscape, shaped by fluctuating job security and the possibility of a prolonged recession, will likely temper any significant market resurgence. For now, FHBs are finding their footing in a market that, although challenging, is presenting opportunities that haven't been seen in years.


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