In a remarkable turn of events, first home buyers have made history by claiming a record 27% share of the housing market in the December quarter of 2023, marking a significant shift in buyer dynamics.
Kelvin Davidson, Chief Economist at CoreLogic, heralded first home buyers as the standout success story of the property market in 2023, with their market share reaching 25.8% throughout the year, a notable increase from the 2021 peak of 23%. This surge marks the first time they have surpassed other buyer groups, showcasing their resilience and determination in a challenging market environment.
Several factors contribute to their remarkable ascent, including access to KiwiSaver for deposit boosts, a willingness to compromise on location or property type, and the ability to navigate low deposit lending speed limits at banks, all of which reduce competition from other buyer segments.
In 2023, first home buyers completed approximately 17,000 property transactions, a notable increase from the 14,500 purchases recorded in 2022. In contrast, mortgaged multiple property owners, including investors, had a subdued year, accounting for approximately 14,000 purchases or 21% of annual activity, marking the lowest level on record.
Davidson noted the softened purchasing activity among investors, attributing it to a combination of factors such as loan-to-value ratio restrictions, low gross rental yields, high mortgage interest rates, and ongoing interest deductibility rules.
However, there are signs of a slight uptick in investor activity in recent months, suggesting a potential resurgence as the market enters a new cycle. With property tax changes coming into effect, including the restoration of deductibility to 80% from April 1st, the dynamics of investor demand are poised for a notable shift.
Meanwhile, relocating owner-occupiers, or movers, have also exhibited subdued activity compared to historical standards, comprising just 25% of the market in the fourth quarter of 2023.
Looking ahead to 2024, Davidson anticipates the property market's recovery to continue, albeit with some caution due to persistently high mortgage rates and the potential implementation of caps on debt-to-income ratios later in the year.
In summary, the unprecedented surge in first home buyer activity underscores their growing significance in the housing market landscape, signaling a notable shift in buyer dynamics and setting the stage for continued evolution in the property market in the coming years.