First home buyer affordability little changed in April, but those who bought a first home five years ago may be wise to assess whether it is time to move on and up

Little has changed .

And I dont buy into the bifurcation argument , simply because I have yet to see the roadmap how we are going to get to Planet Labour's Utopia of Kiwi - buy - build -rent - off plan or whatever its now called .

Kiwi build or whatever , is simply not going to happen on the scale intended .

And we forget that "secondhand houses " are simply tracking the horrific prices of new builds , and those costs are going up and up and up .

So anyone who thinks they can get a $650,000 NEW house in Hobsonville , Mt Eden or Millwater for that price when the price levels are established at over $1,2 million, is dreaming

We go on and on about the cost of housing , and fail to even recognize the causes of house-price inflation .

We bring in way too many immigrants for us to cope with , they( immigrants ) bring skills and in most cases money

They use that money to buy our houses and over-pay for them because we have not built enough houses for everyone

The folk at the bottom of the social ladder are forced out to make way for new owners and end up sleeping in the back of the Honda Odyssey

I'm sure this made for some incredibly depressing reading for FHB's and anyone who cares about the future of NZ alike;
https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12…

There has to be huge pent up FHB demand so unless there is a major economic shock or sentiment takes a serious knock, this pent up demand will prop up current prices more or less.

However, while debt remains high, and wage growth muted, NZ remains incredibly vulnerable to an economic shock and who are most vulnerable? The FHB's who have recently taken on huge mortgages, at historic low rates. If the above article is anything to go by, some of these FHB's have gone to extreme lengths to scratch their deposit together and have no wiggle room at all, if the economy goes tits up for some reason.

If you are a first home buyer out there who has recently managed to get on the ladder, well done, but please don't party too hard or don't take on anymore debt for now. Pay off as much as you can in the short term (you'll save yourself massively on mortgage interest later) and then if all the China/USA trade drama dissipates, if inflation remains shy and interest rates stay put, if the global economic instability retreats and the housing markets gets its soft landing.... then party!

I think there is a good argument here. However, I suspect that the impact on prices of Kiwibuild will be wider than a specific niche. For instance, three bedroom homes in poor repair (the usual starting point for first home owners) will need to compete with two-bedroom houses.

What I also suspect is that a large increase in the two bedroom townhouses will also appeal to a growing aged and live-alone population. People swapping the dilapidated family home for a small townhouse with double glazing, and low maintenance.

If it was not for Kiwibuild increasing supply in that niche, I suspect the traditional margins between two and three bedroom houses would decline because of demographic changes.

I don't care to speculate. Unfortunately we have yet to see that the governments policy will had any appreciable impact on affordability or supply. In fact general consensus about outcomes seems to vary only between disappointment and flop presently.

At present demand has been deferred so often and created such an imbalance that it's difficult to see a substantial change in the market while employment remains relatively low.

Very good article and rationale for FHB to consider.
However, the article while considering impact of Kiwbuild on lower part of the market, neglects to mention the withdrawal of property investors from that part of the market which compounds the issue for FHB vendors.
RBNZ figures show that investors new mortgages have dropped from 2,141 for the March month 2016; to 1,425 for March 2017; to 1373 for March 2018 - down 768 (a 36% drop) for the month of March 2018 compared to March 2016.
Even without additional properties from Kiwibuild, the lack of interest from property investors means that there is likely to be greater competition for FHB vendors in the lower end of the market.
There has been a slight increase from FHB, but this is up from 753 in March 2016, to 819 in March 2107 to 911 in March this year; an increase of only 158 - far lower than the 768 fewer investors.
So exit of investors good news for FHB, but not FHB vendors.
RBNZ figures available: https://www.rbnz.govt.nz/statistics/c31

"The property ladder" - an interesting societal shift.
Buying and selling to get up "the property ladder" is really only a characteristic of baby boomers onward.
As a baby boomer, it was a feature of my parents and grand parents generations that they tended to buy/build their first home for life. They were far less mobile not only in terms of job (job for life) but also in terms of migration (both nationally and internationally). They also tended to stay put in the same house.

Just look at the Stats that David has provided for a moment .

If anyone thought Auckland was bad , just look at Tauranga , up an eye-watering 86% increase in lower quartile average price in just 60 months .

There is nowhere that you could have got an 86% tax -free return on your money in that timeframe from a tangible asset , and if you had borrowed or geared to say 90% , the returns on actual cash outlaid would be phenomenal

For ordinary Mr Kiwi you can bet wages in the Bay of Plenty have not gone up by 86%

How come there's no Auckland - East?? Very stoopid indeed!

Paying workers better wages and improving their working conditions would surely improve productivity? Obviously such wage increase would have to be large to enable most to buy in Auckland. Saying that, the snake could be eating it's own tale - if supply doesn't increase, fresh money will just drive up house prices and the aforementioned pay increase won't mean much.

The word sentiment gets thrown around a lot by NZ economists, normally referring to business owners, property speculators, retail consumers, etc. But what about the sentiment of migrants, renters and wage earners? You know, the people that actually enable people to own businesses, speculate and have disposable income?

Immigrants for example are very hard working (see Statistics NZ) and often bring talents/skills beyond their working visa. NZ isn't the only country wanting immigrants to fill skill gaps and use as a source of cheap labor to bolster GDP. The living conditions for immigrants in NZ is often terrible and the payment for their hard work can be low. Immigrants know this and they are starting to leave! NZ is so blind it doesn't realize that countries are going to start fighting for even semi-skilled immigrants soon .. and they won't wan't to come here.

The sentiment of renters in NZ is negative. Rents are too high and quality far too poor. The housing crisis is said to 'get worse before it gets better' and those renters who have suffered for years in Auckland, Wellington and Christchurch are getting their ducks-in-a-row before moving. Some renters will move to smaller towns but many in the upcoming workforce, in their prime working years will flee the NZ rental markets for Australia, UAE, Japan, UK, even China.

There is a cost to working, workers require certain things; accommodation, deodorant, food, transport, a bank account, tools, clothes, etc. Obviously this is a reason why homeless people don't just all get jobs. Now dear reader, you have likely heard stories about workers becoming dispossessed, living in caravans, cars, tents, even couch surfing. These workers are on the edge and many/most will find their homelessness leads to unemployment - after all "it's going to get worse before it gets better".

Now despite popular belief, workers aren't thick. Workers know the traditional deal is; when you work a job, you are more or less guaranteed the ability to rent an actual roof over your head . This guarantee is not so anymore .. so the workers who most benefit the country (single, healthy, tax payers) and often have the most savings will leave to take advantage of better living standards in other countries.

So what's the end of the matter .. sentiment of first-home-buyers is changing. First home buyers are coming to terms with properties in our cities not being worth the financial burden. Many move to the regions or overseas for higher living standards. Many will buy homes overseas. The remaining workers will largely find themselves fighting to stay on the rental ladder.

I'm not saying there won't be home buyers but first-time-buyers may quickly dry up among middle income earners as they did among low income workers. New Zealand could fast become a country where older generations own all the property/wealth, younger NZ generations (workers) have all left the country or are rough sleepers, skilled migrants have left NZ and low skilled migrants do all the jobs alongside pension receiving baby boomers.

There aren't going to be "thousands" of new homes for sale at $650,000. Wont happen, not in Auckland. There would have to be a phenomenal surplus, the like of what happened in Dublin, but the deficit in Auckland keeps growing at a faster rate, it needs to start reducing, then get to break even, then actually start reducing the built up demand from the past 10 years, before it can get anywhere near an oversupply type situation. $650k for a new build is cheap even for the boondock towns in NZ.

'People who bought five years ago should look to trade up' - lets look at the reality of that shall we. Most people who bought five years ago were competing with the buy to debtors and probably paid too much for the house (albeit they didn't overpay as much as those last year did). 5 years into the 30 year mortgage they now have an understanding of what it takes to reduce debt. (they've likely only managed to pay off around10% of their original loan by now - only 25 years to go people). Now David is suggesting that they stretch themselves again to buy a bigger house with more debt over a longer term.. Except these buyers were 35 when the bought their first home, they are now 40 and with 25 years to pay back the balance the numbers don't make sense. Sorry everyone all of those that remortgaged the family home to buy a 'buy to debt' you have actually snookered yourselves because there are now not enough people with the ability to trade up to buy your family home. Top down correction on the way and it will be very painful for the over-geared.

People that bought and borrowed 5 years ago will be a helluva lot better off now than those that didn’t providing they were positively geared.
If you bought 5 investments over the past 5 years you could possibly be now a full time investor and not need that 9 to 5 job.

It is all about learning how to do it