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In June the first home buyers borrowed the smallest amount for this grouping since February, while their share of the total borrowed dropped from the previous month's high

Property
In June the first home buyers borrowed the smallest amount for this grouping since February, while their share of the total borrowed dropped from the previous month's high

The march of the FHBs has had at least a pause.

New Reserve Bank figures for lending by borrower type show that last month the first home buyers borrowed the lowest amount they have as a grouping since February.

Generally the amounts borrowed by the FHBs have been rising and rising - as well as their share of the overall amount borrowed.

However, in June the amount borrowed by the FHBs dropped to $926 million, from a record high of $1.15 billion the previous month.

The overall amount borrowed in June was down markedly on that recorded in May as the winter slowdown took effect. 

The total amount borrowed was $5.441 billion, down more than a billion dollars on the $$6.47 billion borrowed in May.

However, the June total was slightly higher than that for June 2018, when $5.305 billion was borrowed.

In May the amount borrowed by the FHB's hit a record high of 17.8%, but in June this share fell quite markedly to just over 17%. 

It will be interesting to see if this fall proves to be a glitch or whether the appetite for first home buyers has been satisfied and we will now see the share settling at these levels.

The recent rise of the FHBs has been inversely matched by the decline of the investors, although in June there was a blip up in the share of borrowing by this group, with the $1.024 borrowed by them making up 18.8% of the total borrowed, up from just 17.6% in May.

Before the Reserve Bank clamped tough deposit restrictions on investors in mid-2016, the share of borrowing by this grouping was running at around 35%.

The RBNZ will be making another call in its November Financial Stability Report on whether or not to further relax the rules around lending on high loan to value ratio mortgages. 

At this stage there would appear nothing in the figures to stop the RBNZ from deciding in favour of such a relaxation.

Much may depend on what the RBNZ decides to do while wearing its other hat of monetary policy.

The general expectation is that the central bank will further cut the Official Cash Rate (to 1.25%) when it makes its next interest rate review on August 7. 

Such a move could be expected to be stimulatory for further borrowing, particularly if it's followed by another cut later in the year as some are predicting.

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30 Comments

Two articles in Interest.co.nz today, one saying the outlook is improving for FHBs with falling house prices and lower mortgage interest rates and this one saying FHBs borrowed the smallest amount for this group since February.

Gosh the next 12 months will be interesting.

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Hi delboy
I think one needs to take a closer look at the latest RBNZ data in detail.
Of more importance is the number of FHB rather than their % share of total monetary borrowing (e.g. increasing investor activity could push down FHB % of borrowing) . .
Over the past three years (July 2016 to June 2019) there has been surprisingly 73,917 FHB - far more than at a rugby test match.
For each of the (July to) June years:
2017 - 22,832
2018 - 23,569
2019 - 27,516
Note the trend.

For the June month only:
2017 - 1868
2018 - 2039
2019 - 2216
Note the trend.

I have posted before: I don't think that the % share of borrowing is a true reflection of FHB - the number of borrowers, the activity of different groups (e.g. investor activity), and changes in house prices/markets mean that the % share is not particularly a sound comparison.
Bottom line - FHB are very active.

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Those numbers are well off. The number of new ‘loans’ written last month was 2700 to first home buyers. But there are very big questions about how many loans make up a typical first home buyer mortgage. June there were 2216 loans to first home buyers out of a total of 21,216 total new loans.

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Hi Joe
Not sure who is right here - my reading (column U - 60) is 2,216.

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Printer8
Appreciate that you’ve changed your original comment which was inaccurate, but how were you able to change the time on the comment that I posted that highlighted that?
Do you work for interest?

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No Joe
You haven’t caught me out either regarding working for interest.co nor in bed with the mistress - my life isn’t as exciting.

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Joe you say "but how were you able to change the time on the comment that I posted"
You have a knack of seeing conspiracies around every bend. Maybe "they" are out to make you look crazy!

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Come on, Joe adds another quality side to the housing debate. If you're going to call him out at least try and do it on data rather then personal insults. It certainly is an interesting time watching the market slowly turn (and potentially the start of this bubble bursting).

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If ‘loans’ truly represented the total mortgage exposure of our first home buyers, or should we call them sacrificial lambs. Then the 2216 loans made in June (representing just over 17% of the total value of new loans written, which weren’t all for purchasing because many of the other 20,000 ‘new loans’ will have been refinancing loans) have somehow purchased 37.1% of of the 5978 sales recorded in June by the REINZ. That is if loan numbers are cross referenced against transaction volumes. But that’s not the case.

Therefore the concentration of debt that our poor little lambs are taking on, is actually far higher than we used to get reported in articles like this on C31 data... notice how David doesn’t discuss average first home buyer mortgages on these articles anymore? It’s because the average first home buyer loan (whilst hovering iver 400K) isn’t the true extent of what the average first home buyer mortgage is.

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Is a couple one or two fhb’s ?

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Auckland FHB = more debt. No breakdown of figures by city. ZZZ.
If you look at price bracket, sales are falling in 650-750k bracket but by less (9%) than upper brackets

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That’s not nearly enough new debt being created - I’m going to say a cut in OCR is now at 80-90% probability for August 7th.

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Yes. Get out the defib

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My fervent hope is that the fall in FHB is due to all the financially able but impatient ones who wouldn't/couldn't wait having jumped, and now there really is no one to buy the houses at their current prices since investors and foreigners have deserted the market.

Though as Printer8 pointed out, the actual number of FHB is what matters, not how much the borrow.

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I'm a potential FHB. Bid on a place last week, hoping for a bargain... was outbid by old mate Ron Hoy Fong. He's still optimistic, I guess. I'm going to keep holding out for something that vaguely resembles fair value.

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Way to go Brisket.
You are clearly looking to buy at the right price. Losing out to an active investor shows that your appreciation of value is pretty well spot on.
My gut feeling is that winter prices will continue to be seasonally subdued. Not sure what the spring will bring but like most commentators I see a fairly flattish market and don't see any trend or factors indicating either a boom or bubble burst.

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Hi Milkyone you say "My fervent hope is that .... no one to buy the houses at their current prices"
A good straight-up position, but why would you think like that. If you are a would be home purchaser caught between two rocks I can understand your feeling. Keep in mind that a falling market could make your chances even slimmer which I think is part of the reason fhb have borrowed less overall even though there are more loans. Banks are restricting finance to Auckland buyers due to the weaker market

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I am in the strange position of being a FHB with the means to buy a house today, but the patience to wait until tommorow.

Effectively, what I really want it for either the DGMers or the Spruikers to be proved right, one way or another. However if we are on the edge of a large drop in house prices, I would be a fool to buy now. My current plan of action is to go to open homes every few weekends, and read absolutely every bit of economic analysis avaliable, to keep my finger on the pulse of the market. If I get a strong sense that actually the market is not going to fall, I will buy. However so far everythign I have seen/read tells me its coming down.

A falling market would be fantastic for me; while it may reduce the choice of property I have, if will mean I end up paying less. And I am in no rush, and will happily trot along to open homes indefintely until I find something that fits.

Also bank restrictions are irrelevant to me; me and my partner are both on high, secure salaries, and we have saved a massive deposit over the past 5 years or so. If someone in my position cannot get a mortgage, then the whole country is toast :)

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I would hope all numerate FHBs continue to wait, educating themselves to identify value in the market as you are doing. I can only assume we are seeing innumerate FHBers buying at the moment. The maths is simple, if the marginal buyer can only buy at DTI of 6 (very high!), and an LVR on 80%, then he can only pay for houses with a value to income (VTI) of 7.5 (= 6/80%). The average house price to income is currently more than 9 in Auckland, which can only be remedied by a price reduction of around 17%.

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I am pleased you have got yourself in to a good position. What I am worried about is that you overanalyse everything to the point you won't actually make a move. You will always be worried about what's around the corner, home ownership includes a lot of factors that cant be priced. Good luck with your endeavours

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Housework’s, I agree with you that there are many that over analyse things and will always miss out on opportunities and be worse off than those that take action!
The thing is that Milkyone states that over the past 5 years they have saved a massive deposit for a house!
What I would say without doubt is that if Milkyone and his/her partner were both on big income and had a good deposit 5 years ago they will be a huge amount behind the eightball, from not having bought well before now, with the way prices have gone up in Auckland.
Milkyone May think that they have done the right thing by not buying but I guarantee that they will never get prices dropping by as much as the gain they would’ve got from buying years ago at a lower price!!!!

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Oh no doubt, I would have bought 5 years ago if possible.

However 5 years ago I was earning $35,000 a year, and my partner was in uni. Today we have a joint HHI of $150,000 pre tax, and are saving about $80,000 a year in straight cash (which is doing very well on the sharemarket).

So over the past 5 years our savings went from
2015 - 0
2016 - Not much
2017 - $10-20k
2018 - $30-50k
2019 - $130k
2020 - $210k this time next year
etc

So I have only really been in a position to buy in the past 12 months. And I feel comfortable with my decision not to have bought in Auckland 12 months ago. (leaving Auckland is out of the question due to career choice).

I guess time will tell whether I am right in waiting till 2020 and onwards...

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Very well done then Milkyone.
Great to see that you are doing very well and you are doing the right thing then.
What I would be doing is investing in property now seem you now have a very good deposit.
Would I be investing in the sharemarket at the moment, no, but if you are happy with the market continuing to grow then I am pleased for you.
Cash of 210k would return you far more investing in property rather than the sharemarket and more security, but I am not talking about the Auckland housing market.
At the end of the day we all make our own decisions and you are now doing very nicely and I commend you on that!

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This news is really quite telling. More choice in new homes than at any time in the past decade. Lowest rates ever. Full employment. And still FHBs aren't buying as many places.

Given we already know top end has had a significant slow down this would imply the mid / lower tier is just starting to do the same.

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Glitzy; your comment "And still FHBs aren't buying as many places" is very clearly wrong if you refer to RBNZ data.
Refer to my posting above - over the past three years, year on year the number of FHBs has been steadily increasing and, June month year on year, likewise.

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Methinks the lady doth protest too much

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Unfortunately the sales figures from the 650-750k bracket in Auckland are down on first 6m of 2018, by 9% and apartment sales in that bracket by 35%.
This makes it improbable that FHB are going to wow the market, or have been.

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Glitzy, see my analysis on LinkedIn this morning. Figs will help you

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May be FHB who were desperate have already bought and many who are sensible have understood that after already missing the current boom, it is worth waiting to get the most for their deposit.

Investors are not active, Foriegn buyers are out and now even if FHB backs out.....Just Imagine

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Hi David,

you may find the sales figures for Auckland in the 650-750k bracket in last 6m compared to 2018 useful.
I have put them up on LinkedIn this morning. They are falling.

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