ANALYSIS: First-home buyers have been the main drivers of the residential property market since early 2023. Based on the data I'm getting from my various monthly surveys, they will continue to be a dominant influence for the remainder of this particular housing cycle.
Last week, I ran through a list of 16 reasons why the net upward pressure from investors applied to house prices and turnover since the middle of the 1990s has now gone. That doesn't mean all investors have disappeared – just many of those who have been driven primarily by FOMO or hopes of strong capital gains and who have little experience of property investment.
Those who treat investing in property as a business and who focus on cash yield rather than capital gains will remain, and more of them will appear. But they, like young buyers, will be able to enjoy a market that's no longer troubled by panicked purchasers.
I can see this quite strongly from my latest survey of real estate agents. This is a survey I have been running each month since April 2020 during the first Covid lockdown. Back then in 2020 we saw the likes of 90% of agents saying buyers were driven by FOMO. At the peak a net 59% said they were seeing more investor buyers and a net 77% said the market was in favour of sellers – a seller’s market in other words.
Start your property search
Now, a net 23% say that they are seeing fewer people looking to purchase property as an investment and a net 37% say we are in a buyer’s market.
Discover more:
- Tony Alexander: 16 reasons why it's all over for mum and dad property investors
- US buyers get residency, fork out over $12m for Waiheke lodge in gated estate
- Hollywood Hills in West Auckland: Resort for sale after 85 years in same family
If I stopped writing here or you were to stop reading, then you’d be left with the impression that the investment part of the market is on the weak side. You’d be right, but you’d miss the most significant development currently underway.
Ever since young buyers began driving the market in 2023, there has been an expectation that investor buyers would follow. But a lift in investor demand in the second half of 2023 quickly faded away, as did a similar rise late in 2024 as mortgage rates started falling. Late last year, as people became more optimistic about where the economy was headed, and the Reserve Bank cut interest rates by another 0.75%, there was only a mild new lift in agent observation of more people looking to buy investment property.
But over the most recent four-week-period the net proportion of agents seeing this fell to the net 23% mentioned above from a net 6% at the end of January. Exiting summer, the towel has been thrown into the ring by those hanging out for an investor surge now that mortgage rates have started erratically going back up again, with further rises expected later this year.
Independent economist Tony Alexander: "Young buyers will be able to enjoy a market that's no longer troubled by panicked purchasers." Photo / Fiona Goodall
This is leaving the field clear for first-home buyers to choose from the near-36,000 properties on the market for sale. This is good news for the potential ability of our country to offer a home-ownership route for the many young people contemplating a shift across the Tasman. This may especially be the case because there is renewed upward pressure on house prices in Australia, and the relative bargains that used to be available in the likes of the outskirts of Brisbane are no longer there.
But before any of us get too optimistic about a decent reduction in our net loss of young people, this interesting point should be noted. Property management companies are noting increased business from recent young buyers of property placing their properties with them for management as rentals while they relocate to Australia or further afield to earn higher salaries for a few years.
