Low house prices and deposits help first home buyers

The increasing number of low deposit mortgages being lent to first home buyers has been borne out by the latest CoreLogic research.

Thursday, May 09th 2024

New Zealand Mortgages says five out of 10 mortgages it has written recently have been for first home buyers (FHBs) with just a 5% deposit.

CoreLogic says FHBs are taking full advantage of lower property prices, the availability of low-deposit finance, opportunities to tap into KiwiSaver funds and reduced competition from other buyers.

Low equity loans to first home buyers have been at about 30% since the middle of last year. Their number peaked at just over 40% in May 2020.

CoreLogic’s biannual First Home Buyer Report shows FHBs accounted for 26% of purchases in the first quarter of this year, well above the long-term average of 21%.

CoreLogic chief property economist Kelvin Davidson says since the previous edition of the report in November last year, there have been two mini-phases in the housing market recovery.

“There was a small burst of price growth at the tail end of last year, but more listings became available over the first few months of this year, which has contributed to a slowdown in property values, as conditions swing back in favour of buyers,” he said.

“Throughout all of these market changes, one constant factor in recent months has been the continued strong presence of first home buyers.”

Tricky conditions

As FHBs navigate tricky lending conditions and high mortgage rates, Davidson says they have been taking advantage of the low-deposit lending allowances at the banks, using FHB grants and loans, and in some cases compromising on location and/or property type.

FHBs are paying less for more this year, with the median price falling to $695,000 in the first quarter from $699,000 last year and $715,500 in 2022.

That’s despite standalone houses, bigger properties, representing a higher share of FHB purchases this year, which essentially signals that FHBs are getting ‘good deals’ in the current conditions,” Davidson says.

“Although the median FHB price might be lower than the market more broadly, they’re often not buying the cheapest properties.”

The price being paid by FHBs is significantly higher than the lower quartile, or bottom 25%, of all buyers, where the median price is $565,000.

“It shows that the typical FHB doesn’t always enter at the bottom of the market and work their way up. Many actually enter the market well above the bottom rung of the ladder.”


The national trends can also be seen at a more granular level with data across Auckland, Hamilton, Tauranga, wider Wellington, Christchurch, and Dunedin recording FHB activity above long-term averages.

FHBs made more than one in three purchases at 36% in wider Wellington, compared to 22% in Tauranga. In Hamilton, FHB activity is 34% and well above its long-term average of 24%. Even in Tauranga recent activity has still been well above average at 16%.

Davidson says this above-average trend is consistent across all main urban centres despite there being a significant gap between the cost of a mortgage and rents.

“With mortgage rates having risen sharply, and even despite a recent acceleration in rental growth, the extra cost to pay the mortgage compared to rent is still quite high,” he says.

“With rent being significantly cheaper it certainly highlights that most FHBs are likely to be buying for reasons such as stability of tenure rather than due to simple financial drivers.”

FHBs are also highly active in the country’s next 12 key centres, nabbing significant market share in many areas.

The highest number of FHBs were recorded in Rotorua, representing 32% of all buyers, while Palmerston North and Invercargill each saw FHBs comprising 31% of buyers. These figures exceed Rotorua and Invercargill’s long-term averages by 9% and 8%, respectively.

Davidson says while it’s difficult to determine someone’s motive to buy in a certain area, it’s likely affordability and lifestyle are key contributors for the surge in FHB activity in many urban areas.


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SBS FirstHome Combo 6.14
Unity First Home Buyer special 6.55
Co-operative Bank - First Home Special 6.79
Heartland Bank - Online 6.89
Wairarapa Building Society 6.95
Co-operative Bank - Owner Occ 6.99
Kiwibank Special 6.99
Unity 6.99
TSB Special 6.99
ICBC 7.05
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Unity First Home Buyer special 6.45
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SBS Bank Special 6.69
ICBC 6.69
TSB Special 6.75
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China Construction Bank 6.75
Kiwibank Special 6.79
Co-operative Bank - Owner Occ 6.79
SBS Bank Special 6.19
ASB Bank 6.39
Westpac Special 6.39
ICBC 6.39
AIA - Go Home Loans 6.39
China Construction Bank 6.40
Kiwibank Special 6.55
BNZ - Classic 6.55
Co-operative Bank - Owner Occ 6.55
TSB Special 6.59
SBS Bank 6.79
SBS FirstHome Combo 6.19
AIA - Back My Build 6.19
ANZ Blueprint to Build 7.39
Credit Union Auckland 7.70
ICBC 7.85
Heartland Bank - Online 7.99
Pepper Money Essential 8.29
Co-operative Bank - Owner Occ 8.40
Co-operative Bank - Standard 8.40
First Credit Union Standard 8.50
Kiwibank 8.50

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