First-home buyers are keeping the housing market alive

The five things you need to know about the housing market this week.

1. First-home buyers remain strong

The Cotality Buyer Classification figures for June showed first-home buyers are on top. Their market share of purchases for the month was 28.4% and for the quarter 28.3% – the former a near-record, the latter an actual record. Meanwhile, mortgaged multiple property owners – including “Mum and Dad” investors – have seen their quarterly share of purchases fall twice in a row, back down to 22.5%. There are perhaps some election-related nerves emerging here for investors.

For relocating owner-occupiers (movers), there’s still a bit of caution evident, with this group only accounting for 25.6% of deals in Q2, the lowest since early 2009 at the height of the GFC. In this uncertain economic environment, many households are obviously just choosing to stay where they are rather than take a risk on a move.

2. Construction costs are rising, but builders are taking the hit

Meanwhile, the latest Cordell Construction Cost Index (CCCI) for Q2 showed that house-building costs accelerated by 1.1% in the three months to the end of June and by 3.5% annually. Of course, slightly faster growth is not surprising given the rise in dwelling consents and the inflationary effect of the US-Iran conflict.

That being said, the data also suggests that construction firms are – for now at least – absorbing the price rises rather than passing them onto customers. That’s partly being driven by flat prices for existing houses, which makes it hard for new-build prices to be pushed up. For context, in the previous boom phase for construction costs, growth peaked above 10%.

3. The consumer economy is still sluggish

There was some disappointing economic news last week, which perhaps puts a few question marks around the Reserve Bank’s belief that the wider recovery remains on track. Admittedly, the BNZ-BusinessNZ Performance of Services Index rose from 48.0 in May to 50.6 in June, the first time above the rise/fall mark of 50 since January. But for the last two years, much of the PSI has been below 50, and one figure above 50 is a small change. Similarly, Stats NZ’s electronic card spending data showed a chunky drop of 1.4% in June. Both are hardly a strong set of figures for such an important share of the economy.

Cotality chief economist Kelvin Davidson: “Many households are obviously just choosing to stay where they are rather than take a risk on a move.” Photo / Peter Meecham

4. Net migration is rising, but there are big downward revisions

Another reason to be a little cautious about spending, as well as property demand, is the still-low level of net migration. Yes, as arrivals of new residents lift a little and departures of NZ citizens fade, the net migration flow in the 12 months to May hit 18,814 – the highest since January 2025. But it’s still a long way below the average (circa 31,000), and not only that, there have been significant revisions. For example, last month, the 12-month migration flow to April was estimated at around 22,800, but has since been revised down to 17,500 – something to be mindful of.

5. All eyes on the CPI

Looking briefly ahead, the big release this week will be the consumers price index for Q2 on Tuesday. It’s the Reserve Bank’s sole target for monetary policy – aiming to keep inflation within the 1-3% band over the medium term – but unfortunately, the latest figure is likely to be well above that range, with the latest signal from the RBNZ being that it expects 3.9%. If we get that result (or above), it’ll keep us on the path to another likely OCR rise in September. By contrast, it’d take quite a big downward surprise to really raise some questions about future monetary policy.

- Kelvin Davidson is chief economist at property insights firm Cotality