1. First-home buyers are hanging in there
Following a slightly quieter period over January to March, the Cotality Buyer Classification figures for April showed a bounce-back by first-home buyers, with their share of property purchases rising from 25% in Q1 to nearly 27% in April. Tapping into their KiwiSaver funds for at least part of the deposit remains a key support for first-home buyers, as does access to the low-deposit (or high LVR) lending allowances at the banks. Just over a third of first-home buyers are getting a foot on the ladder with a deposit of less than 20%.
At the same time, mortgaged multiple property owners (including investors) remain on the comeback trail too, rising to 24% of activity in April. That’s still a touch below their long-term average of around 25%, but nevertheless the highest figure since late 2021. Interest deductibility is now back to 100%, which no doubt helps the sums look better for would-be mortgaged investors. But the biggest factor is surely the fall in mortgage rates, which significantly reduces the cashflow top-ups from other income sources that are generally required on a standard investment purchase.
Meanwhile, movers (i.e. relocating owner-occupiers) are still a bit quieter than normal in terms of their share of purchases. But as overall sales activity continues to increase across the market this year, it’s likely that all buyer groups will do a higher number of deals, even if not all groups’ market shares can rise at the same time (given these must always add up to 100%).
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2. A stable level of pain (and gain)
The share of property resales made for a gross profit (i.e. sale price above what the owner originally paid) – or gain – was broadly stable at 91% in the first three months of the year, meaning gross losses (or pain) were also flat at roughly 9%. Where a profit was made, the median figure was $280,000, down from the more than $400,000 gain during the post-Covid boom, but still a substantial sum.
I’d just make a couple of points about this, however. For owner-occupiers, that’s not generally a cash windfall; new equity is simply required to go straight back into the next purchase. And second, hold period is vital. Short ownership periods of 2-3 years are far more likely to see losses, whereas a typical hold period of 8-9 years almost inevitably results in gains.
3. Subdued net migration is keeping a lid on property demand
Last week’s figures from Stats NZ showed that the annual rolling total for net migration is now back down to around 26,350 – well below the peak of more than 135,000 in October 2023 and the long-term average of about 32,000. It’s hard to know when this migration down-cycle might bottom out (and at what level), but either way, the subdued results further add to the expectation of a soft economy and housing market over the coming months.
Cotality chief economist Kelvin Davidson: "Interest deductibility is now back to 100%, which no doubt helps the sums look better for would-be mortgaged investors." Photo / Peter Meecham
4. Probably nothing much property-related in the Budget
Budget 2025 will be delivered at 2pm on Thursday and it promises to be a tight affair in terms of fiscal spending plans, at least based on the Government’s pre-announcements to date. I’ve seen nothing to suggest that property will feature directly, although I suppose we’ve always just got to be a wee bit alert for any possible changes to the foreign buyer ban at some stage.
5. Hoping for good economic news
Otherwise this week, we’ll also get the latest NZ Activity Index from Stats NZ, as well as the performance of services (BNZ-BusinessNZ) and retail sales. Recent economic data has been a bit patchy, so it’d be great to see more growth in this week’s figures.
- Kelvin Davidson is chief economist at property insights firm Cotality
