As mortgage lending rates and living cost increases start to moderate across New Zealand, there are very early indications that buyers have more confidence as we head into summer.

However, tight financial conditions and economic uncertainty spells uneven appetite across purchasing groups, though first-time buyers are leading the current uptick in transaction activity.

FIRST-HOME BUYERS

Purchases from first-home buyers appears to be the current driving force in the market.

“Buyer classification data from CoreLogic suggests that 26% of recent purchases were by first home buyers. This has been trending up over the past 12 months” says Chris Farhi, Bayleys Head of Insights & Data.

“Market data suggests the recovery has been led by the lower end of the market – this makes sense given we are seeing more activity from first home buyer”

“More widely, the market has been gaining momentum with REINZ’s house price index rising for the last couple of months and sales volumes improving. The major cities like Auckland and Wellington have been leading this recovery. We expected this to happen because these markets also had the fastest and biggest correction during the downturn”.

"Ability to secure sufficient finance remains a headwind for some purchasers, particularly first home buyers” The sentiment mirrors anecdotal evidence from Bayleys salespeople across the national network that first home buyers are taking advantage of current market conditions, considering rising rental costs and more manageable residential property prices, making it an excellent time for this buyer group to act now.

INVESTORS

Investors have a comparatively smaller presence in the current residential market, appearing to be holding for greater economic and political certainty. Deposit requirements, the removal of interest deductibility provisions and increased compliance costs from legislation like Healthy Homes Standards have contributed to a more difficult climate for mortgaged investors in recent years and have seen them take a step back amid financing difficulties and other cost rises.

Bayleys salespeople anticipate muted activity from mortgaged investors, with near-term capital gain uncertain and the real possibility of needing to top up investment cash flow from other income sources.

This is supported by the latest data from independent economist Tony Alexander, reporting that investors intending to buy a property in the next 12 months remain at a steady 21% amid ongoing political debate.

NEW RESIDENTS AND INTERNATIONAL CAPITAL

Net migration inflows into Aotearoa have turned to a net gain of 96,200 in the year ending July 2023, compared with a net outflow of 14,500 the year prior.

Likely contributing to this migration boom is the expansion of several visa options in support of broader labour shortages, with several additional roles added to the ‘Green List’ enabling fast-tracked residency.

The bulk of this migration boom is expected to initially settle in Auckland, although the tight rental market may lead some migrants to consider other regions. Stats NZ believes the migrants are typically originating from countries that are subject to the foreign buyer ban such as China, India and Philippines, so while it’s unlikely they will buy immediately, it is also foreseeable that higher demand in the rental market might push local first home buyers into action.