First home buyers appear to be taking a cautious approach to the current housing market with fewer of them taking out mortgages and the average amount they are borrowing in steady decline.
According to the latest Reserve Bank figures, 1520 mortgages were approved for first home buyers in February.
That was the lowest number of mortgages taken out by first home buyers in the month of February since 2015, and was down by 10% compared to February last year and -35% compared to February 2021.
However the overall housing market has declined by much more over the same period.
The REINZ recorded 3964 residential sales in February, down 31% compared to February last year and -52% compared to February 2021.
Those figures suggest that while first home buyers are less active in the market than they were a couple of years ago, other types of buyers such as investors and those moving up the property ladder have pulled back far more.
Consequently, interest.co.nz estimates that first home buyers' total share of the housing market has steadily increased from 28% in February 2021 to 38% in February this year.
The figures also suggest they are being more cautious in the amounts they are paying for a home and the amounts they are borrowing.
Interest.co.nz estimates that the average amount paid by first home buyers for a home of their own in February was $646,000.
That's 14% more than the REINZ's national lower quartile selling price in February and 15% less than than the national median price, suggesting their activity remains concentrated at the lower-priced end of the market.
The estimated average price paid for a home by first home buyers has now fallen for five consecutive months and in February was $72,000 lower compared to its peak of $718,000 in April last year.
So it's no surprise that they are also borrowing less.
Based on the Reserve Bank figures, the average size of mortgages approved for first home buyers in February was $536,000, down by $59,000 from the May 2022 peak of $595,000.
The number of first home buyers taking out riskier low equity loans with less than a 20% deposit remains relatively steady on 28%, which is more or less where it's been for the last six months.
But that's down significantly from the frenzied market conditions of mid-2021, when more than a third of loans being approved for first home buyers had less than a 20% deposit.
A regional breakdown of housing affordability for first buyers is available in interest.co.nz's monthly Home Loan Affordability Report.
The comment stream on this article is now closed.
- You can have articles like this delivered directly to your inbox via our free Property Newsletter. We send it out 3-5 times a week with all of our property-related news, including auction results, interest rate movements and market commentary and analysis. To start receiving them, register here (it's free) and when approved you can select any of our free email newsletters.
We welcome your comments below. If you are not already registered, please register to comment
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.