Buying in 2019 – Market Positives for First Time Buyers

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Buying in 2019 – Market Positives for First Time Buyers

In our two part series, we are going to look into some of the positive changes that have occurred towards the end of 2018 and in the early months of 2019, to help those that are potentially looking at 2019 as the year of buying their first homes.

A Return to Market & Affordability

Despite some of the bleak news we constantly hear about housing prices and housing affordability in New Zealand, you’d be surprised and pleased to hear that at the end of 2018, first time buyers had actually started regain back some of their market share. This has been a result of many beginning to earn more (and an overall increase of employment) and many first time buyers are willing to buy in more southern and western suburbs in Auckland, where houses are more affordable.

A recent report indicated that Housing affordability has remained the same with a recent quarterly home affordability report indicating a 2.2 per cent decline nationwide in the period, as a 4.6 per cent lift in the median house sale price was enough to outweigh a 0.5 per cent increase in incomes and lower mortgage rates.

Auckland showed an improvement in affordability, up 0.8 per cent, despite being one of the hardest markets to enter, due partly to supply shortage and population growth. Recent improvements in incomes and interest rates are key factors that are helping affordability.

Low LVRs

One of the biggest changes to hit the property market in 2019 has been the ease of mortgage lending restrictions by the Reserve Bank of New Zealand, these new lowered restrictions, which came into effect in January, had Owner-occupier restrictions shift to 20% and banks are now able to lend 5% of their new loans to investors with a deposit of less than 30%.

The latest data from CoreLogic has revealed that so far, as of January, there has actually been no clear impact from looser LVR rules as of yet. But we are in the early days of a new year, and many don’t move back into seriously looking at buying until some time after the holiday period has ended.

The Reserve Bank of New Zealand reported that mortgage lending activity rose again in December, following a trend from the nine months previous. Total lending in 2018 was $64.3bn, up by 8.9% from the figure of $59.1bn in 2017. This shows that despite knowing about the forth coming lowering LVR restriction, banks are still containing ‘risky’ interest-only lending, as the share of lending done on interest-only terms is holding below 30%.

This may sound a little bleak but is actually good news, it means that banks and the reserve bank are still making sure that the market remains stable to prevent another market crash, which can have disastrous effects on lenders. As always, we recommend doing research into the current state of the market, especially as you being looking at mortgages and interest rates, having a third party with some experience like a mortgage broker can be an essential tool during this time.

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Ravi Mehta