First Time Buyers Lay Foundations for a Strong Market Post-COVID

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First Time Buyers Lay Foundations for a Strong Market Post-COVID

First time buyer are out in full force it seems, taking up record amounts of buyign figures and leaning heavily on their kiwi savers to do so, all of which is resulting in soem record-breaking selling numbers for the market.

The latest Reserve Bank residential mortgage lending by borrower type figures show that nearly $6.8 billion was advanced in mortgages in August, which follows a record for a July of nearly $6.6 billion the month before.

The $6.8 billion borrowed in August 2020 was up some 26% on the figure for the same month a year ago (nearly $5.4 billion), and easily surpassed the previous record August tally, which was $6.1 billion in August 2016.

First home buyers were again strong in the market last month, exactly matching their record borrowing level of $1.344 billion borrowed in July 2020. The July FHB total was also a record in terms of its proportion of the total – at 20.4%.

It seems that this due in part to first home buyers benefitting significantly from the sharp fall in mortgage interest rates since the COVID lockdown in March, and particularly in Auckland, as the drop in interest rates has had a bigger impact on mortgage payments than it has on house prices at the bottom end of the market.

In March the average of the two-year fixed mortgage rates offered by the main banks for buyers with a minimum 20% deposit was 3.31% and by August that had fallen to 2.72%.

It also seems that first time buyers are leaning heavily on their KiwiSaver to achieve their property buying dreams, with  KiwiSaver withdrawals by first-home buyers increasing by 25% in the 2020 financial year. First-home-buyers withdrew $1.2 billion in the year to March 31, according to the Financial Markets Authority’s (FMA) annual KiwiSaver report released on Thursday.

This was equivalent to 1.9% of the $62.0 billion of KiwiSaver funds under management as at March 31 – a slightly larger percentage than the 1.7% a year earlier. More up-to-date Inland Revenue data shows there was a spike in withdrawals in March 2020, a dip in April and May, and then a recovery in June, July, and August.

With this seeming like an upward trend, and we aren’t even in the high performing months of summer, it could be seen that all-time records could be broken in the coming months.

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Daniel Vernon