Big drop in the amount first home buyers are paying for a home

Property / news

Average amount first home buyers are paying for a home dropped by almost $17,000 last month

29th Feb 24, 8:56am by Greg Ninness

Last month saw a significant decline in the estimated average amount first home buyers are paying for homes.

Interest.co.nz estimates the average price paid by first home buyers purchasing a home in January 2024 was $656,557, down $16,784 (-2.5%) compared to December 2023.

January’s estimated average price was the lowest it has been since February last year when the market was in full slump mode.

Interest.co.nz’s calculations go back to 2014, with the estimated average price paid by first home buyers peaking at $718,000 in April 2022.

The estimated average price paid by first home buyers in January was 116% of the Real Estate Institute of New Zealand’s lower quartile selling price for the same month, suggesting, unsurprisingly, that first home buyers remain grouped at the bottom end of the market.

However, the prices first home buyers have been paying has been slowly but steadily increasing against the lower quartile price since April 2022, which corresponds with a steady rise in the percentage of first home buyers who were taking out low equity loans with a deposit of less than 20%.

In January 31% of the mortgages approved for first home buyers were low equity loans, up from 16% in March 2022.

The rise or decline in low equity lending to first home buyers generally follows the relaxing or tightening of Reserve Bank rules on low equity lending.

The average amount borrowed by first home buyers in January this year was $547,000, up just slightly from $549,000 in January last year.

There were 1503 mortgages approved for first home buyers in January this year, up a whopping 29% compared to January last year, but up just 6% compared to January 2022 (see graph below).

The comment stream on this article is now closed.

Note: Interest.co.nz first home buyer calculations are based on REINZ and Reserve Bank data.

•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.

47 Comments

by balance | 29th Feb 24, 10:45am 1709156726

Thats encouraging as Chris Bishop is keen for housing market to reduce by 50%. Sounds like we are on the way. The government of smokes, pseudo and semi autos is making a difference. Getting us back on track.

by Mr Ed | 29th Feb 24, 11:18am 1709158713

😂

by ChrisOfNoFame | 29th Feb 24, 11:21am 1709158897

That post by balance was sarcasm? If not, I share your sentiments.

by Crazy Horse | 29th Feb 24, 11:18am 1709158710

Remember all you "astute" property investors, it's absolutely no problem, as you can just buy and sell amongst yourselves :) ......keep listening to AC and TA ....she'll be right mate !

Margins are only going to get tighter for builders of new property, to meet the market to get a sale on that new build, and with banks doing their 180 degree turnaround from "dishing out" those mortgages to checking what you spend on food a month, then declining your application, house prices for FHB's are going to HAVE to decline ....the halcyon days of all the ticket clippers and "vested interest" brigade are all over. So time to get out and do some "real work" and actually produce something tangible that is going to create future incomes for the country's economy....rather than just rents, that sucks income straight out and into the banksters or landlords pocket.

What a way to run an economy of a small island nation at the bottom of the world .....and at the end of the day when it all goes "belly up" don't come crying to the taxpayer, just put your big boy pants on and sort your mess out ....you made your bed, now lie in it.

by JustAnOpinion | 29th Feb 24, 11:31am 1709159473

You mad bro?

Investors such as myself have been in the game a long time and we will be just fine.

FHB's are always part of the market and as the cost of credit comes down they will be able to buy in as they always have. I agree there is soon to be a more substantial price correction (and if you include cost of cash it will be well over 10%) and that will really help.

However the price floor is set by immigration and the cost of building a house that is getting higher and higher.

by FHBtears | 29th Feb 24, 1:15pm 1709165706

FHB's are always part of the market and as the cost of credit comes down they will be able to buy in as they always have.

I’m sorry but that’s objectively untrue. So many FHBs have been priced out of the market for most of the last decade. Mostly thanks to the efforts of “Investors” such as your self and the absurd market settings that let you continue to “invest.”

by Crazy Horse | 29th Feb 24, 1:48pm 1709167739

Bro ...... not mad, just "crazy' niiieeeegghhhhhhhhhhh !!

You just "hit the nail on the proverbial head" .......Investors such as myself have been in the game a long time and we will be just fine.

That's the whole problem with housing market in NZ .... the greed, selfishness and "I'm all right Jack" attitude of you boomer "clever" property investors, blindsides what really should be going on in a small, far flung economy. While I have been banging on here for well over 10 years, the money that gets dragged into mortgages and rents could be going into R&D, innovations and inventions etc, while that NZ No. 8 Wire creativity and experimentation is being stifled, as everyone is just "running to stand still", paying their increasing rents or mortgages. Then the Gummint and the banksters panic and says "sh*t, we are running out of cash cows !" so they open the immigration tap to replace the smart ones that have left for Aussie etc ....and of course with immigration, as we all know, to keep wages down with people that will work for less.

Mate , you stick with your knitting and watch the overall standard of living drop in this country ..... but NZ can do far better than that OR can they ???

by JustAnOpinion | 29th Feb 24, 2:09pm 1709168991

Yeah I'm not arguing we are not were we should be but your neighing at investors is a little miss placed, the problem is not with people doing what they assess as the best use of their money, it is in the structural incentives that need revision.

In regards to me, not a Boomer, work in innovation (patents yada, yada), built all the houses I have a mortgage on (not own) bar the house I live in.

Can we do better? Yeah no doubt, immigration being a whole lot more targeted at the workers we need would be a start. Taxing capital gains is a no brainer, income assessing Super and pushing it out a few years, providing interest free loans and small tax breaks for companies wanting to enter our monopoly/duopoly markets etc.

by Crazy Horse | 1st Mar 24, 11:29am 1709245765

JustAnOpinion ..... You may read this or not, but I get the gist of what you are saying and I wish there were more people around that thought and acted like you. You are not just relying on rental housing as the ONLY ticket to a successful financial future and expecting the government ie taxpayer to help you along.

This "myth" in NZ has been permeated by the real estate industry itself, banks, MSM and the related industries themselves, for well over a decade now, that property is the ONLY WAY to financial success......while as we know in industry and business, if you create a bubble, that bubble NEVER lasts forever - as it is primarily driven be emotions not FUNDAMENTALS

And then, as always with a bubble, there will be a handful who did very well and will shout from the rooftops their success - while leaving much stress, worry and consternation for those who are yet to enter the market ie FHB's and for those who only just bought, at those ridiculous prices.

That's why as a homeowner myself, I can see so many others trying to get a foothold in the market, while the ladder - whether it be price, access to finance or interest rates, pulled up at every opportunity, just to satisfy a "bubble" industry...... holistically that is not good for a small country's economy, and while it may not affect you or I, it does affect many others.

My motto is you really only need one house - get that first, as then you have a stable base THEN see where your strengths lie, be creative and pick a path that is immensely enjoyable to you - then the finances will come. That may be a rental property or it may be a patented invention that takes you to the moon ! ....figuratively speaking.

by J.C. | 29th Feb 24, 12:30pm 1709163038

banks doing their 180 degree turnaround from "dishing out" those mortgages to checking what you spend on food a month, then declining your application, house prices for FHB's are going to HAVE to decline

Might be time to start working on the Hitler bunker parody script starring Vittoria Shortt. Granny Herald will be one of the poor weeping German women when Hitler starts berating and blaming everyone else but himself.

by timbob | 29th Feb 24, 12:48pm 1709164090

actually if it all goes belly up, its the taxpayer that pays for a bailout..

by RickStrauss | 29th Feb 24, 12:50pm 1709164228

Another bailout, after $11 billion of taxpayer handouts during COVID, another couple of billion each year in rental and price subsidies, and hundreds of millions more for property that got flooded (billions, including mitigation measures). Property must be one of NZ's most generous welfare schemes, all things considered..

by FJP | 1st Mar 24, 6:31am 1709227874

Builders would need to become more efficient.

Builders must improve the processes.

This includes productivity and being more agile. Go to any constuction site and count people standing around.

by ChrisOfNoFame | 29th Feb 24, 11:27am 1709159261

A long, long way to go to get down to Bishop's 3 to 5 times income. (The NACTF love the talk. It'll come back to bite them.)

And RBNZ has DTIs at 7 in their first setting.

So basically it's not going to drop anywhere close to Bishop's fantasy for a long, long time.

(And just quietly, if prices do get down to 3 to 5 times income, the poor FHBs buying now are not going to get the un-taxed capital gains that the boomers selling out now have got. More likely losses.)

by JimboJones | 29th Feb 24, 11:42am 1709160142

You would be insane to invest in housing right now unless you think Bishop is lying or you think National will be as useless with housing as Labour were (both probably true).

by OldSkoolEconomics | 29th Feb 24, 12:17pm 1709162278

In nz buy anytime... and the leaders will ensure u do well...

Year1 (now) Consents are down immigration is up

Year 1to2 Tradies will be lost (overseas/other jobs) due to the downturn.

Year 2to3. Ocr drops. Economy rebounds. People start to buy.. but wait there aren't enuf houses or peeps to build them...Nor workers, so prices go nuts again.

Year 3TO4. Houses go up 20 to 30 percent and FOMO is back.

Might be out by a couple years. But that's our insane NZ economic cycle.

Assumption - the world and energy prices don't go off the scale this year.

by HouseMouse | 29th Feb 24, 8:11pm 1709190698

I pretty much agree with most of that, although I don’t think up 20-30% in year 3-4: maybe 10-ish

Pretty much flat for the next 2-3 years with a few ups and downs

by agnostium | 29th Feb 24, 12:29pm 1709162956

Disagree on Labour and housing. They had started to turn the market with the policies National are now repealing. The crazy boom was down to interests rates and easy access to credit which are set by RBNZ and banks.

Of all the things they f****d up, housing wasn't one of them.

by J.C. | 29th Feb 24, 12:34pm 1709163250

Disagree on Labour and housing.

Perhaps Cindy was right - you can have increasing house prices and affordability at the same time.

Perhaps time for me to rethink my Pied Piper of Hamelin analogy.

by interesting1234 | 29th Feb 24, 12:58pm 1709164712

If you're one of the lucky half that keep their jobs, you may even be lucky enough to get a payrise and to be able to afford and overpriced 1940's cold, mouldy s*&tbox :D Oh the New Zealand Dream is alive and well today (sarc)

by JimboJones | 29th Feb 24, 1:26pm 1709166390

I think Orr turned the market both ways.

Labour did a few good things (and National have got off to a very bad start by repealing them), but they didn't build many of their 10k houses per year. Agree that National will no doubt be worse than Labour were, however they may be lucky and be elected at a time where house prices ain't going up anyway.

by HouseMouse | 29th Feb 24, 8:22pm 1709191368

you really are a labour fan girl 😂

Objectively they were poor on housing:

- how many kiwibuild homes were built under their watch, relative to their promise?

- how many state homes got built in places like Tamaki, relative to their targets?

- how many NET states homes got delivered under their watch?

- how many homes have been built on the Unitec site, a project they announced with great fanfare in 2018?

Answer - they were abysmal on all these fronts, and several more

Also, They opened the immigration floodgates to extreme levels, that has not helped and has indeed been to the detriment of housing

but…. i am a balanced person so I will give you the following:

- the tax changes were good, but it’s not much more than a stroke of the pen

- yes the RBNZ was mostly responsible for the destructive house price boom post-covid. Having said that, Labour didn’t help by changing the RBNZ’s mandate

by RickStrauss | 29th Feb 24, 12:48pm 1709164113

Well, one factor to consider is the amount of personal wealth the PM and major MPs have invested in property portfolios...I cannot imagine they actually want houses to drop 50% in price - with any real intention to execute, anyway.

by OldSkoolEconomics | 29th Feb 24, 5:15pm 1709180101

Yeah. If Luxon owns 7 properties.. a conservative portfolio value would be $10m... every 10% drop is a $1m personal loss.

Any bets on his priority.

by malamah | 29th Feb 24, 5:28pm 1709180922

Constrain govt spending, force the plebs to take on more debt for zero productive gain. Plain and simple. Meanwhile the pain is settling in across the country.

by legrandsoir | 29th Feb 24, 12:13pm 1709162006

Depends if he is talking median single person income, or being disingenuous by using household income.

by timbob | 29th Feb 24, 12:59pm 1709164757

Don't worry, prices will get down to 3 to 5 times income, just wait 10 years for incomes to catch up, and excess of vacant residential land puts a lid on prices. The immigration numbers and affordability indicate its probably time to create some new towns in NZ. Canterbury has loads of satellite towns, which are being revitalized, hence the flat property values, except the cost of building is still going to increase. Plenty of existing housing for $1000 per sqm, hard to get cheaper existing houses than we have now.

by Dale Smith | 29th Feb 24, 2:56pm 1709171790

Yes, I was discussing this with a colleague the other day.

If price rises just stay even and incomes rise to get us to a lower median income multiple (which they need to do), then this should mean that home dwellers have more disposable income to 'invest' which they need to do to offset the fact that won't be getting any speculative capital gains like previous sellers have.

The question is how much return and where to invest to get the amount needed for retirement, given it wouldn't be coming mainly from the sale of the house?

There are models for this overseas but of course, NZ is not looking at any of them.

But the takeaway point is, that things are worse than we think, as the poor economic situation has been subsidized by the fact the 'boomers' had been able to buy at 3x median income multiple and sell to other people the same property that are purchasing at 10x median income multiple.

There is no way future generations can sell and create that differential. Past sellers have generally been able to sell at high prices and have a lot of net equity out of the property. This has been used by many to subsidize families back into a house, effectively delaying the inevitable.

As these people sell down and use up their funds they are being replaced by people that won't be able to repeat this. and as time goes on all the low median income sellers are disappearing as will their ability to support the present market via the bank of Mum and Dad.

by IT GUY | 29th Feb 24, 11:51am 1709160710

Prices will fall 10% from current levels by the end of Dec 24.... and another 10% next year , that would bring much of AKL FHBers to a 7 multiplier.

by John Mendel | 29th Feb 24, 12:48pm 1709164113

IT GUY In your dreams. Unless you plan to buy an apartment/townhouse, so there's no point to wait, you can get one now with 20% off the market value.

by IT GUY | 29th Feb 24, 12:59pm 1709164744

Be Quick no point waiting.....

by Thats All Folks | 29th Feb 24, 2:11pm 1709169094

The spruiks really hate it when you throw common sense at them 🤣

by malamah | 29th Feb 24, 2:41pm 1709170885

The price you pay today is the market value.

by David6766 | 1st Mar 24, 11:30am 1709245820

Isn't that exactly what FHB should be looking at?

by Yvil | 29th Feb 24, 2:39pm 1709170755

"Prices will fall 10% from current levels by the end of Dec 24"

10% guaranteed ?

by HughJorgan | 29th Feb 24, 11:53am 1709160829

Whatever your view, everyone must agree that this has a long time to play out. There are so many variables, like construction costs, that are going to play a key part in the changes over the next 5 years.

What we should all be hoping for is flat prices for the next 10 years. That would be a somewhat neutral outcome for all. Not great for either side, but better balance for NZ long-term.

by Chairman Moa | 29th Feb 24, 12:26pm 1709162770

TimeToPee will be here soon to give the brighter news but I can see recession is looming on horizon! Plus that orange dude will play havoc to the world security in 2025 - 2029!

by IT GUY | 29th Feb 24, 12:35pm 1709163328

TA - its all munted

Business investment prospects for 2024 look munted. That is bad for productivity growth and will limit the extent of interest rate declines through 2025-26.

Household spending in New Zealand is well munted, as seen in recent trade data. This is exactly what the Reserve Bank needs to see to feel confident their policies are causing pain.

House building is also - guess what - munted for 2024 with developers becoming increasingly desperate to offload stock.

Exports - well when they're running 7% down from a year earlier we can also consider them to be munted as well.

by interesting1234 | 29th Feb 24, 12:59pm 1709164783

He must have smoked up his last supply of hopium, now he will get the delayed crash like the NZ housing market he so spruiks.

by John Mendel | 29th Feb 24, 12:45pm 1709163906

Luckily we have Bishop, the wizard. next year it'll be a 170K drop ;)

by malamah | 29th Feb 24, 1:32pm 1709166760

43,000 TM listings, climbing, climbing.

Interesting times.

by Yvil | 29th Feb 24, 2:37pm 1709170663

The average amount borrowed by first home buyers in January this year was $547,000, up just slightly from $549,000 in January last year.

There were 1503 mortgages approved for first home buyers in January this year, up a whopping 29% compared to January last year

by malamah | 29th Feb 24, 2:45pm 1709171110

Meanwhile in Jan yoy; 5% increase in overall sales, 10% increase in listings.

More sales at lower prices. Market is "booming".

by Nzdan | 29th Feb 24, 3:54pm 1709175268

$547,000 is down slightly from $549,000 if my math is correct?

by Middleaged | 1st Mar 24, 8:27am 1709234844

And all those good people who took out huge mortgages at low rates three years ago are refixing at 7.5%. Mortgage stress is becoming more prevalent.

by blobbles | 1st Mar 24, 11:18am 1709245090

Meanwhile:

https://www.stuff.co.nz/politics/350194489/nz-politics-live-luxon-claim…

by RickStrauss | 1st Mar 24, 1:49pm 1709254157

NZ has a problem with bludgers, apparently