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Latest BNZ-REINZ residential market survey shows a big apparent drop-off in the numbers of potential first home buyers entering the market

Posted in Property

Young people may be starting to give up on their dreams of owning a first home - at least for now, according to the latest BNZ-REINZ residential market survey.

The August survey, which attracted a low response of 253 estate agents, produced a record low of 18% of respondents reporting that they had been seeing more first-time buyers in the market.

That's a sharp drop from 28.4% in the previous month and goes against an average figure across the life of the survey of 34%.

BNZ chief economist Tony Alexander said the latest result continued a downward trend seen since March.

The result comes as the Government attempts to ease the way into the market for first time buyers by relaxing the requirements for them to get into homes.

But it also comes at a time when the Reserve Bank is believed to be on the brink of announcing some sort of "speed limits" on high loan to value lending - a category into which first time buyers normally fall. See here for articles on LVRs. 

The Government's $64 million package for first home buyers came after it had first attempted to get the RBNZ to exclude first-time buyers from the LVR restrictions.

Alexander said the latest survey result appeared to "run counter" to the argument some have put forward that first home buyers have flooded the market the past few weeks in order to secure a loan before new Reserve Bank rules come into force.

"However, given some evidence that banks have already tightened their high loan to value lending in anticipation of the rule change this result may reflect first home buyers starting to give up on their home ownership dreams for now," he said.

In this survey the agents were asked in what ways they thought low-deposit house buyers would look to get around the new RBNZ limits.  

"Overwhelmingly, the expectation is that they will get money, guarantees, or direct equity participation from parents," Alexander said.

"The second highest expected option is extra finance from second tier (more expensive) lenders."

According to the survey record numbers of respondents are seeing the current market as one for the sellers, with a net 26% reporting this, up from the previous high of a net 24.4% just a month ago.

Alexander said that in contrast with the previous two months when agents noted a falling away of potential vendors asking for valuations, this month there has been an improvement, but only to a net 0%.

"Our BNZ Business Survey contained over two pages of responses from people in the residential real estate sector telling us that listings are scarce however and getting scarcer," he said. 

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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23 Comments

Not a surprise. But it means

Not a surprise. But it means that commenters on this website who claim that first home buyers are pushing up prices, and that KiwiSaver subsidies will make it worse, can keep quiet.

If there is a time series of

If there is a time series of these responses somewhere, it would be kind of interesting to compare "number of first home buyers as described by Real Estate Agents" with actual house sales, to see what if any relationship there is between the two (i.e. does this survey matter)

Two down 98 to go   The

Two down 98 to go
 
The latest signs of stress in the suburb beneath One Tree Hill came when a five-bedroom two-building property with a rateable value of $1.58 million at 24 Maungakiekie Ave failed to secure a single bid at auction on Wednesday night

21 Maungakiekie Ave
Owner: Young Xin Chen
Bought 2005 by Young Xin Chen purchase price of house $450,000.
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10897573

24 Maungakiekie Ave
Ownwer: Xiang Min Wen
Xiang Min Wen took over the lease for 24 Maungakiekie Ave
February 2004 purchase price of house $550,000
http://www.stuff.co.nz/business/money/9024096/Another-Cornwall-Park-house-abandoned

Most of Maungakiekie Ave land

Most of Maungakiekie Ave land is Cornwall Park Trust leasehold with ground rentals on large sections around $70,000p.a. gulp. I would have thought that should render the houses almost valueless

Certainly not valueless to

Certainly not valueless to the owner. He just creamed an easy $450k by initially selling the house to a innocent new migrant and then gets the house back for nothing. Looks like local kiwis ingenious ways of ripping off new migrants unfamiliar with the landholders ability to move ground rents up by massive leaps and bounds after laying dormant for 15 to 20 years.

I think you have got that

I think you have got that wrong, The Park Board are now the "owners" by default

Yes, the owner i refer to is

Yes, the owner i refer to is the land owner not the building owner.

I'm confused. The land-owner

I'm confused. The land-owner didnt own the house and didnt sell it for $450k

long term lease I assume,

long term lease I assume, from say iwi. They own the land the house is on, in effect the house becomes worthless, wide boys at play shall we say. I saw one when i first went buying, I was told it was "a good buy" when I looked it was lease and not freehold, with about 10 years left...the so called 160k house was discounted maybe 15~20k.....of course the agent told me they "normally renew at a similar fee to what you pay now"  cue tui add....
regards
 

No, Bequest of Sir John Logan

No, Bequest of Sir John Logan Campbell to the people of Auckland
 
Interesting History
http://www.cornwallpark.co.nz/index.php?s=2
Sir John Logan Campbell Residuary Estate
c/o The Cornwall Park Trust Board (Inc.)

two otherguys, the land owner

two otherguys, the land owner originally owned the house and then sold to unsuspecting new migrants for $450k and $550k, whilst retaining the land. This is the nature of leasehold property sales quite different from cross leases. The title can be quite confusing as they would also refer to cross leases as leasehold. But they are different types of leasehold. With Cross lease, you own a part of the freehold land but with this type of leasehold you have only bought the building and have no land ownership and subject to exorbitant ground rent fees in the future virtually wiping the value of your original purchase price of the building.
 

We will just have to

We will just have to disagree
The leasehold properties surrounding Cornwall Park have been leasehold since the inception of the Park Trust back in 1901. To the best of my knowledge, the Trust has never built any of the houses. All of the houses on those leasehold sections are old. Built many years ago by lessees at a time when prices were a lot cheaper. If you read the comment upthread carefully it says "Xiang Min Wen took over the lease for 24 Maungakiekie Ave" when he/she bought the house for $550,000. The purchasers only inter-action with the Park Trust Board was to take over the lease of the ground. The Park Trust Board did not sell anything to any unsuspecting new migrant or migrants. Over-and-out.

two otherguys. clearly you do

two otherguys. clearly you do not understand how leasehold property works. Nothing to disagree, you are just totally and completely wrong in your understanding of leasehold ownership. The old buildings were sold to these new migrants retaining the land in the ownership of The Park Trust Board. The lease of the land is required to store your acquired house on the grounds. Therefore for $450k you get an old run down house and a lease of the land for typically 99 years. Subject to ground rent increases periodically usually every 15 years or 21 years.

@zanzayne. Maybe that

@zanzayne. Maybe that "innocent" migrant or foreigner should have done due diligence, I am sure you would be one of the first to point that out to an NZer who got diddled in China

I think it is a brilliant way

I think it is a brilliant way of getting access to your paper profit whilst retaining the land and then in 15 years increase the ground rent and wipe out the building owner and get it all back for free plus charge the building upgrade and do up to the building owner. Lots of unsuspecting new migrants.

Collateral damage of the

Collateral damage of the skyrocketing prices in Auckland
 
Each property has a rateable value of $1½ million
Ground rents are assessed at 5% of valuation
 
Over the last 21 year lease period ground rents have risen from $7000 pa to $70,000 pa a rise of 1000% which reflects the impact of rising property valuations
 
As a result of these rising valuations, which are outside the control of the Trust, the Cornwall Park Trust Board has been thrust into a potential dilemma of owning 100 leasehold sections they can no longer realistically lease out. Vacant. No income coming in. The two owners above have walked out owing substantial unrecoverable arrears. The total value of the land is in the vicinity of $150 million, so long as it is leased out. Otherwise it is an albatross.
 
The Cornwall Park Trust has been in existence for over 100 years happily doing its thing, maintaining and operating the park, for the benefit of all aucklanders, from the proceeds of the ground rents.

From one perspective, the arrival of migrants into auckland and paying ridiculous prices has had unintended consequences with a ripple effect that is now causing collateral financial damage to an icon of Auckland's past
 
One wonders what the Cornwall Park Trust Board's solution will be?

Entry Fees .. Toll Gates

Entry Fees .. Toll Gates

Now if the CPTB did what most

Now if the CPTB did what most of the churches have done over recent years, then everything would be OK.
Most churches saw the light and allowed freeholding of residential while holding on to commercial etc.
The cash from selling a $1.5m property in Greenlane would buy a very nice commercial property yielding more than the 5% they get right now.
Blame the CPTB management for not seeing the problem. The misinformed buyers who thought they had a bargain deserve  whatever befalls them by not getting advice on the risk they took on.
I bought a leasehold in 1998 and uplifted the freehold in 2001 having calculated the value of the lease expiry period and checking with the church board that they would allow freeholding. Simple really.

Truely bizarre.  While I

Truely bizarre.  While I understand the legalistic boondoogle people are locked into here.  It really does not make sense.
Rateable value 1.5mil.   Well maybe by the 'rules' but the values are not actually true.
Take two identical sections.  Next to each other.  Say in a very desirable location.
Value might seem to be $750,000.00.  But #2 is leasehold and you have to pay $37,500.00 per annum for it.  You might be able to #1 for the $750K.  But nobody sensibly will give you much for the second.  And given the extra complications and risks of the lease, even less than the strict calculation.
So what it's its real value? possibly zero. and does the 'ratable value' have any reality at all.

Hmmm, we might have to look

Hmmm, we might have to look abroad for willing wage slaves to reinforce the market, since our home-grown wage slaves can barely afford their McDonalds, a crappy Subaru, and a damp sleepout at mum and dad’s place.

What about giving the first

What about giving the first home buyers a chance to build their own house or buy a new apartment by waving the GST for them?
 

The problem is the first time

The problem is the first time home buyer, the more they can pay the higher the first time buyers houses go, hence taking 15% off just gets added to the price. Hence you need to curb what 1st time buiyers can do.
Apartments are just more houses there is no difference...so I dont understand why thats a point?
regards

hardly surprising that first

hardly surprising that first home buyer numbers are dropping away when property is so unaffordable.
I bet there's a fair few who are exasperated as they attend auction after auction and are outbid by either NZ or foreign speculators