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Fortune Favours First Home Buyers

A person putting coins in a jar, saving up for a house.

With low interest rates heavily influencing the shape of the market, first home buyers are starting to take up a bigger piece of the property purchasing pie.

Investors are shying away from Auckland with the city being cited as one of the worst places to invest in according to REINZ. Property prices increased by 7.6% from June 2019 to June 2020. However, the price increase was a whopping 16% for the year from August 2019 to 2020. Auckland’s rental yield was weak at 3.2% making investors look for opportunities elsewhere in the country. Hence the reason why places like Southland recently saw their prices skyrocketing.

Home buyers moving furniture into their house.
Home buyers have weathered the storms and are ready to move in for the summer.

Savings are up and so are mortgages

With the pandemic panic settling down, New Zealanders are taking a more cautious approach to handling their money. Saving has become a high priority.  The amount of money in bank deposits is higher than ever with a figure of over $197 billion. The lending amounts are also increasing with buyers trying to make the best use of those low interest rates with the outstanding mortgage amount climbing to over $287 billion. September itself saw an increase of over $2 billion in mortgages. That figure denotes the largest monthly increase since March 2007.

Australian $100 bills stacked up inside a house
New Zealanders are saving more money and borrowing more to buy a house

Term deposits are dropping while residential investor lending has grown by 6.7%. On the other hand, owner occupier lending in New Zealand’s biggest city is up by 6.3%. While home buyers are increasing their borrowing, the same story isn’t true for businesses. Business lending growth has an actually seen a 0.5% decrease, that factor has been affected by reduced credit card lending and a general fall in consumer lending overall.

First home buyers continue to dominate the market

First home buyers have seen their share of the mortgage market nearly double in the last 5 years while investors have seen their share reduce by a third. Those are the two main groups behind the continued rise in property prices. And it doesn’t look like this trend will be stopping anytime soon as Kiwisaver withdrawals are up by 25% this year.

With all this interest from first home buyers and investors, affordable homes make the most sense for both parties.

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