NZ First-Home Buyers Defy Convention with Low Deposits

Recent data on home loan figures has revealed some interesting trends in the New Zealand housing market. According to OneRoof, more than half of first-time buyers are overcoming the savings hurdle by securing loans with less than a 20% deposit.

In June, around 16% of lending went to owner-occupiers with less than a 20% deposit. However, when looking specifically at loans to first-home buyers, it's estimated that between 50-55% have been done at less than 20% equity. This suggests that many first-time buyers are not waiting until they have a significant amount of savings before entering the market.

Meanwhile, borrowers are still shopping around and looking for longer-term fixed rates. In fact, around 50-60% of lending has been on a two-year fixed rate, up from less than 20% as recently as November last year. This trend is likely driven by borrowers seeking to lock in lower interest rates and reduce their monthly repayments.

Despite the continued uncertainty in the global economy and rising input costs for builders, the number of new dwellings being consented continues to rebound. In fact, consents hit 40,581 in the year to June, the highest figure since August 2023. This upturn is being driven by regions such as Auckland, Canterbury, and Otago, particularly Queenstown and Central Otago.

Cotality chief economist Kelvin Davidson notes that a rate rise in September still seems likely, despite the recent unemployment shocker. He points out that employment actually lifted, so the unemployment rate only went up because of a bigger labour force, rather than reduced labour demand. This suggests that the Reserve Bank may not be too swayed by the higher unemployment rate.