The number of first home buyers getting into a home of their own is back up to pre-Covid levels

By Greg Ninness

First home buyers remained the stalwarts of the housing market in June, but they are paying less for a home than they were last year and are also taking on slightly less debt to have a home of their own.

The latest figures from the Reserve Bank show 2445 mortgages were approved for first home buyers in June, at an average value of $566,000.

That's well up (+30%) on the 1885 mortgages approved for first home buyers in June last year. It puts first home buyer activity back at the levels it was pre-Covid in 2019, in spite of the substantial increase in mortgage interest rates that has occurred since then.

However overall real estate sales remains lower than they were pre-Covid, with sales recorded by the Real Estate Institute of New Zealand (REINZ) in June this year down 8.1% compared to June 2019.

That means first home buyers' likely share of the housing market has increased from 36% in June 2019 to 43% in June 2023.

However the rise in interest rates is having an effect, with first home borrowers borrowing less and paying less to get into a home of their own than they were last year.

According to the Reserve Bank figures, the average size of mortgages approved to first home buyers peaked at $592,000 in April last year, and had declined by $26,000 to (-4.4%) to $566,000 in June this year.

Interest.co.nz estimates that the average price paid by first home buyers declined $36,000 over the same period, from $717,500 in April last year to $681,500 in in June this year (-5.0%).

By comparison, the REINZ's lower quartile selling price has declined by $50,000 (-7.8%) over the same period, falling from $640,000 in April last year to $590,00 in June this year.

With house prices still so high, getting the deposit together remains a significant obstacle for many first home buyers to overcome, with almost a third (31%) of them buying their homes with less than a 20% deposit by taking out expensive low equity mortgages, giving them less wriggle room with their banks if they were to strike financial difficulties.

This story was originally published on Interest.co.nz and has been republished here with permission.