First home buyers continue to hold their own in the housing market despite all the talk of dire consequences as a result of changes to the Credit Contracts and Consumer Finance Act (CCCFA) that took effect from December 1 last year.
The latest lending figures from the Reserve Bank (RBNZ) show that new mortgages were approved for 1417 first home buyers in January.
That was less than half the 2959 first home buyers that received mortgage approvals in November. However that was because total mortgage approvals to all borrower types and residential real estate sales were both well down in January.
The total number of new mortgages approved slumped to 12,007 in January, down 37.4% compared to January last year.
Last month's new mortgage approvals were at their lowest level for the month of January since the RBNZ started publishing the figures in August 2014 and are at their lowest point for any month apart from April 2020 when the real estate market virtually closed down due to Level 4 Covid restrictions.
However while total mortgage approvals in January were down by 37.4% compared to a year earlier, approvals to first home buyers as a percentage of total mortgage lending actually increased over the same period, rising from 10.4% in January 2021 to 11.8% in January 2022.
In fact, the percentage of mortgage being approved for first home buyers is continuing at relatively high levels compared with previous years.
In January 2015, first home buyers accounted for just 5.4% of total mortgage approvals and their numbers didn't pass 10% until May 2018 and didn't pass 11% until November 2019.
Over the two years from January 2020 to January 2022 there have only been four months were first home buyer's share of total mortgage approvals has been higher than last month's 11.8%.
So any suggestion first home buyers are being disproportionately affected by the CCCFA appears to be unfounded.
Where there definitely has been a significant shift in lending to first home buyers is at the riskiest end of the market with low equity loans.
The percentage of low equity mortgage approvals to first home buyers with less than a 20% deposit rose steadily last year, from 32.4% in January and peaking at 37.9% in October.
Low equity approvals then dropped back sharply in each subsequent month to just 20.5% in January 2022.
That in turn has seen a reduction in the average size of mortgages being approved for first home buyers, which declined from its peak of $595,274 in December last year to $577,982 in January this year.
While that is still up by about $60,000 compared to January last year, it is at least a step in the right direction.
It may be significant that much of the hand wringing around the effects of the CCCFA is coming from ticket clippers - people such as mortgage brokers and real estate agents who are either directly or indirectly dependent on mortgage lending for their incomes, but who do not have to deal with the potentially disastrous consequences of borrowers over-stretching themselves with high risk, low equity mortgages.
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52 Comments
And MSM report like its inevitable the CCCFA will be significantly amended...
Is this really the best angle? How about 'January mortgage approvals lowest on record'
Knock it off Greg, no good news allowed on here, everything property related is strictly DGM only now it was their New Years resolution to have a market crash.
Hi Carlos, a simple question. Can you please expand on your DGM abbreviation...?
Hi there, Burgleman,
Welcome to the forum!
“DGM” is an acronym for “Doom & Gloom Merchant(s)”, which someone coined many moons ago. The label has caught on well here, because of its relevance.......
Unfortunately, this forum is infested with DGMs - and their tiresome negativity.
Occasionally, DGMs are referred to as Doom Goblins. Either way, you need to be extremely cautious of what they say - as they’re primarily motivated by self-interest and tend to be greedy, lazy, whinging losers. They’re serial liars too.
Enjoy the forum!
TTP
Gosh. Now where did that report button go?
An alternative explanation is that the term "DGM" was coined almost entirely by people who have a vested interest in property prices rising. It was used to shift the debate away from arguments based on merit, and was used to lump any dissenting opinion into a single bucket and try to paint it as "being negative". Which in essence shows where their interests lie, as they believe property prices going up can only be considered a good thing, and that prices falling can only be considered a bad thing.
It was also used in a similar way to how MLM schemes will berate people who start to question the validity of their business model, usually based on input from a friend or family member - "Don't listen to that 'loser', they are just trying to drag you down. Winners and go-getters don't think that way if they want to get ahead!" etc
You will notice several commenters here no longer even bother to put up anything close to a robust reasoning on the strengths on the property market, and now just fall back on one of the following:
- look at historical returns, they are bound to continue in the future
- those DGM "losers" were wrong in the past, they must be wrong now
- or just repeat the same response verbatim, as they think it will influence people .... "Be quick", "Still room for upwards valuation", "This will be a soft landing for property market"
Ouch! clearly the news has further distorted (edit) Tim's Outlook...
Getting him to read and comment on John Mauldins insightful articles posted here is damn near impossible! Very one eyed....
Retired-Poppy = Crash Crusader
That says it all.
TTP
Ha-ha-ha. :) I'm as much that label as you are a respected Property Broker...
TTP
"All is yellow to the jaundiced eye".
You sure have a horrible view of your fellow human beings.
As a self confessed DGM, I found that response really entertaining!
Hi El Torso,
I do like your spirit.
Yours is also a welcome response.
Have a good day!
TTP
Not happy with unaffordable homes but will be happy if the market drops 50% at least, if not will also be happy when my business picks up. Price of houses won't worry me personally when business is working, but they will for all the younger generation following us, and unlike some on here what makes me happy is a better NZ not just for me but for others, if everyone is doing better then NZ is a better place for all of us to live in. Gloom is high unaffordable housing with millions in debt and young people not being able to afford a deposit.
We would be above water on a 40% correction. A 50% correction would put us under. I'd have no issue seeing a 50% drop into negative territory if the bank leaves us alone while we keep making mortgage payments.
But our deposit in 2017 was less than one year's salary now, so it's not like we have a huge amount of skin compared to recent FHB.
Came to interest.co.nz looking for information and discussion about current and future economy
Found: NewstalkZB on the internet, but with millenials instead of boomers.
Found: NewstalkZB on the internet, but with millenials instead of boomers.
You got both. Plenty of Facebook/Newstalk Boomers on here.
I just think he's buried the lead. This, outside of a lockdown, is the lowest month of mortgage approvals in recorded history.
"FHBS CAN'T BUY AND EVERYTHING IS THE FAULT OF THE CCFA"
Oh wait...
Half the amount of mortgages approved to first home buyers than November.
Is it a coincidence that half of people have a below average IQ?
Falling knives, don't catch!
Half of all people don't necessarily have a below average IQ. Below median yes, but not necessarily below average as it could be skewed lower by a number of people who have no brain at all.
I agree, i can certainly point to a few with no brains at all from the comments made on articles in the last couple of days. No pun intended
Well that's actually how the IQ score works Brock, half the people have an average IQ of under 100. Well One Roof had my property go down 0.44% for the month so not much of a falling knife as yet. Could be a good time to buy at the bottom of this cycle, give it a couple of months yet.
The falling knife metaphor should have been banned because it was repeatedly used just before house prices went up 40%.
Not really it only fell on those who did not buy a house in the end, was a pretty big knife more like a guillotine.
I guess that is another way of looking at it!
90% (maybe more maybe less) of the people that did not buy an house just could not.
I hope this to be crystal.
I don't think is nice to say that they did bad. They did the only possible thing.
Some people are lucky or smart (or lucky to be smart) and have money.
Some people don't have the correct combination of those attributes (mostly luck and money, cause I never saw homeowners clearly too much smarter than renters)
Other than that, honestly, make money by inflating the housing market is not nice. Not something anybody should brag about.
Have met some very vacuous landlords who have worked all their lives in very simple jobs (forklift operator, warehouse storeman etc). Dunning Kruger kicks in at the BBQ and they try to come across as very astute investors.
I guess it doesn't take much to buy a rental property when credit conditions are loose and leverage equity in a rising market due to falling interest rates and loose lending conditions.
I adore the way half of the things you write here don't make any grammatical sense.
Down 4-5% in Auckland and counting so far. The news just travels a bit slower down your way.
Historical corrections have tended to take around 18-24 months to reach the bottom.
Plenty of water yet to flow under the bridge.
Homes.co.nz had a pretty big correction on my place, however that does appear to be directly connected to the release of the new RV's very recently. I do expect some falls in Auckland, the pricing is stupid in comparison to what you can get elsewhere in the country.
We've discussed this before Carlos. If homes.co.nz valuations were in the library, they would be located under "elderly erotic fiction".
Classic.
Why do you continue to mention that website, it has no credibility at all.
Why does it have no credibility? It generally provides a more useful starting data point than an RV and is generally relatively accurate (at least as accurate as corelogic and valocity that the banks use), like any algorithm it does take time to catch up when markets take-off or plateau/decline.
Still prices are high for the quality of houses and average salary in the country.
Happy to be corrected.
Home ownership still represents a key plank in the human maturation process, alongside marriage & having a family. These three big early adult decision-makers form the beginning of the next generation & complete (or continue) the cycle of life that keeps humanity going on earth. I should add, that this happens if you're lucky enough to live in a country where these ''life-changers'' are able to be given due consideration & not interrupted by war, disease, pestilence, ignorance or acts of God, that can sometimes throw these key decisions into disarray. It's good to see the young adults still committing to relationships, new families, communities, businesses, new homes etc. It's our future were committing to here. Will house prices be lower later on this year? Who knows. But if you're starting out to create a family of your own & settle down a be a grown up, does it really matter?
Yes. As a woman with a small child and one due in a week the size of my mortgage has a monumental effect on any choices I have around how much time I get to spend around said children in the coming years. The first three years being the most critical I am told.
Families across the motu face the same horrible choices.
House prices need to be significantly lower.
The main reason my wife and I were so late to home ownership is that we could not tolerate the idea of sending our kids to those crappy, over capacity daycare centers from 3 months of age.
Call us old fashioned if you like.
The welfare of our children came first, certainly came over 'desperately getting on the housing ladder'.
We were very fortunate to have bought at the time and with the means to plan for single-income parenthood should the need arise, too.
Which should be a priority for our society. Our policy has been broken by the long-term parliamentary infestation by property speculators.
The latest data shows the volume of high LVR lending to first home buyers is at the lowest level in 48 months, despite house prices doubling since then. Get real!
Lowest lending figures on record, the credit market is not functioning and it's only those FHBs with parents with a spare rental property to put up as security or a hundred grand lying around as a deposit who can now enter.
What we're witnessing with the twin effects of the return of the temporary LVR restrictions and the CCCFA is the destruction of social mobility and widening wealth inequality.
Mortgage brokers face a clawback on commissions of up to 27 months so there is a helluva lot of skin in the game if loans go bad because borrowers are overstretched - unlike the sideline commentators in the media.
The good news is there's pretty much no chance of default because the government, RBNZ, FMA, MBIE and other regulators have all made it very difficult for anyone in New Zealand to borrow money for years - this is why arrears are at all-time lows and low-risk borrowers can't get lending. Likely also a major contributor to New Zealand's plummeting home-ownership rates.
What we're witnessing with the twin effects of the return of the temporary LVR restrictions and the CCCFA is the destruction of social mobility and widening wealth inequality.
Oh wow!
Here I was thinking the issue causing inequality was the massive 'property bubble' we have that now sees prices vastly outstripping incomes. I had no idea that the cause of this 'worsening inequality' was actually the result of two regulations that restrict credit (and thereby house price growth). Thank you so much for educating me.
Nope, government at it as usual. In order to gain access to credit you need to have access to capital. The more you have to start with the more the government will allow you to borrow. In the current environment you better show up with 150k+ to even have a conversation. In 2018 (when the temporary LVR restrictions had double the current capacity for high LVR lending) you would have needed less than half that. A decade ago (before the temporary LVR restrictions) the government would underwrite a loan in some cases for borrowers with no deposit at all.
That's all illegal these days of course, your ability to access credit and buy a house now depends more on how many your daddy has already.
So you're just complaining that the Government should have let the property asset bubble continue to grow?
I had never considered that there would be a commission claw-back clause in the arrangement between brokers and banks....... makes sense and could make for tricky cashflow if lending practices were sub par.
Yvil, where art thou?
So any suggestion first home buyers are being disproportionately affected by the CCCFA appears to be unfounded.
I'm here Nifty and still maintain what I said multiple times before: the CCCFA prevents some from getting a mortgage and indeed there are less mortgages since the CCCFA came into force on the 1st of December. The smart person understands that the fact that the percentage of FHB rose is simply because the amount of investors dropped faster than the number of FHB's getting their mortgages approved, but there are certainly less FHB's since the CCCFA came into force.
Yep. And the investor changes are due to credit policy changes around how rental income is treated - it's all discounted much more heavily now thanks to the tax changes.
Those government changes of course have resulted in their own negative impacts on another group of people:
https://www.newshub.co.nz/home/money/2021/12/rents-rising-nearly-twice-…
Here are some other quotes you missed from the article:
That was less than half the 2959 first home buyers that received mortgage approvals in November
The total number of new mortgages approved slumped to 12,007 in January, down 37.4% compared to January last year.
"It may be significant that much of the hand wringing around the effects of the CCCFA is coming from ticket clippers ...................."
Spot-on Greg. You hit bullseye there.
If anything, let them have their other changes but keep the personal responsibility aspect and fines for directors of companies that lend imprudently. It is the outsourcing of all risk ultimately to the taxpayer that lets them privatise the profits and socialise the costs without consequence.
Or also make mortgages non-recourse, we could do that...
Explicitly comparing FHB January approvals with November (Oct/Nov are usually peaks) yet no YoY/January FHB specific comparison (only on aggregates)? Oct/Nov is typically peak approval period according to C31, going back over the past few years FHB numbers drop 30 to 40%.
FHB # from RBNZ C31, interesting when you go back just to 2018/2017
Jan 2022 - 1417, Jan 2021 - 1987, Jan 2020 - 1984, Jan 2019 - 1771, Jan 2018 - 1398 Jan 2017 - 1262
Nov 2021 - 2959, Nov 2020 - 3221, Nov 2019 - 2822, Nov 2018 - 2559 Nov 2017 - 1957 Nov 2016 - 2312
Brilliant article Greg. Some may find the facts sour to the taste - but isn't that what separates good journalism from bad?
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