First-Home Buyers New Zealand: Record 29.5% Purchase Share and Market Trends

Kelvin Davidson (00:00:00):
Kia ora and welcome to another special guest episode of the New Zealand Property Market Podcast, brought to you by Cotality. I'm Kelvin Davidson, Chief Property Economist here at Cotality in New Zealand, and I'm very pleased to be joined again by Satish Ranchhod from Westpac. Satish is a Senior Economist there, and we are launching the next edition of our co-branded First Home Buyer Report. It is always a pleasure to write this report, and it is great that we can piggyback off some of Westpac's individual lending records to get that really granular data we can't always get from our own figures. Welcome, Satish. How is life looking for you at the moment?

Satish Ranchhod (00:00:38):
It is great to talk, Kelvin. It has been an interesting time with lots happening in the economy, an election on the horizon, and some really interesting trends in the housing market.

Kelvin Davidson (00:00:48):
The election is obviously looming fairly large amidst a backdrop of inflation, rising interest and mortgage rates, and general economic uncertainty. On the property market, we will be watching the tax settings closely if we see a change of government in a couple of weeks. On the economic front, what are you seeing at the moment? Where is your mind at regarding growth, inflation, and the RBNZ's position?

Satish Ranchhod (00:01:29):
It is a very mixed environment across the country. Down south in Canterbury and Otago, there is a really upbeat vibe supported by strength in the dairying sector. But conditions are softer in the North Island, especially in Auckland and Wellington.

What is consistent, however, is the strength of inflation pressures. Inflation remains firm, and we expect it to go over 4.0% before the end of the year. This sets us up for an environment where the Reserve Bank is likely to raise interest rates over the year ahead. For the housing market, this is a big shift after a period where rates had been moving down or holding steady, which was great for first-home buyers.

Kelvin Davidson (00:02:33):
Inflation is at a very interesting point. People might see that the headline rate fell in the third quarter to 3.7% and think we are on the improve, but some of the core measures look stronger. Fuel prices also lifted toward the tail end of the third quarter and into the fourth, so it is definitely not time to sound the all-clear on inflation.

Satish Ranchhod (00:03:00):
Absolutely. While inflation came down slightly in the September quarter to 3.7%, that is still a very high rate that households are feeling at the supermarket checkout and the petrol pump. With fuel prices rising, this decline is likely just a temporary reprieve. High operating costs are also hitting the business sector, which poses further risks to households down the line. We are watching global conditions closely, but these inflation pressures are likely to linger.

Kelvin Davidson (00:03:46):
I agree entirely. From an investor perspective, buyers are watching the election closely for potential changes to interest deductibility or capital gains taxes. But today, our focus is on first-home buyers, who are less directly impacted by investor-focused tax policy changes.

As we launch this edition of the co-branded report, the headline numbers look incredibly strong. In the third quarter of this year, first-home buyers accounted for 29.5% of all property purchases across the country. This is a brand-new record high, surpassing the previous record set just three months earlier.

This strength is nationwide—from Whangārei to Winton, Auckland to Ashburton. Auckland and Wellington stand out particularly; because prices have fallen significantly in these cities, first-home buyers are representing a share even higher than the national average. It turns out lower house prices really help first-home buyers!

We are also seeing first-home buyers purchase bigger standalone properties. The median price paid by FHBs has ticked up to $715,000, compared to $701,000 last year, but they are getting more house for their money, especially in Auckland where they are opting for standalone homes alongside townhouses. They are active across the entire price spectrum, not just at the bottom tier. They are taking advantage of price falls to get into larger homes immediately. Partnering with Westpac allows us to see actual age and LVR data. What are those figures showing?

Satish Ranchhod (00:07:48):
The average age of a first-home buyer has crept up slightly, sitting around 35 to 36 years old, particularly in Auckland. This means buyers are often in a different life stage and have already started a family, which changes the type of home they look for.

Because we have had an increase in housing supply over the last couple of years, buyers have plenty of options. There isn't that same "Fear of Missing Out" (FOMO) that drove price spikes a few years ago. People are taking advantage of the ability to use KiwiSaver or secure low-deposit finance, but even then, most first-home buyers are still scraping together a full 20% deposit to access better lending rates. Saving that deposit still takes time, especially in Auckland, but the overall trends are highly encouraging.

Kelvin Davidson (00:09:33):
The Reserve Bank data indicates that more people are securing loans with lower deposits, so it is great to see Westpac’s internal figures show the average FHB LVR ticking just above 80% recently.

The average age staying high at 35.5 to 36 is interesting. In the past, average age rose due to affordability pressures. But this latest uptick might actually reflect the lack of FOMO. Buyers don't feel rushed; they can take their time to select the exact house they want rather than diving into the first available option. It is a very positive story for first-home buyers overall.

Looking ahead to 2027, where do you see the market going?

Satish Ranchhod (00:12:28):
I won't try to call the election, but looking to 2027, the global outlook will remain challenging. However, New Zealand's key export markets are performing well, which will support regional economies in the south, while the north remains more mixed.

For the housing market, we are likely looking at minor price falls overall this year, followed by very muted growth in 2027. Auckland and Wellington will likely remain soft, which benefits first-home buyers, while the lower South Island regions should experience moderate price growth. Christchurch remains highly attractive, offering a great lifestyle and better affordability than Auckland or Wellington. It will be an uneven year, so we should remain cautious.

Kelvin Davidson (00:13:52):
The Reserve Bank and the OCR will play a massive role, operating with those classic economic lags.

As a final topic: do you agree that Kiwis are starting to accept that future house price growth will be much lower than the historical 7% to 10% annual averages? Factors like increased housing supply, debt-to-income ratios, tax settings, and flat interest rates suggest we are in a changed environment where house prices grow at a more moderate pace, which ultimately improves long-term affordability.

Satish Ranchhod (00:15:17):
Absolutely. For a long time, the standard expectation in New Zealand was regular annual growth of 7% to 10%, largely driven by property investment sentiment. But we are in a different world now with increased supply, and investors are focusing more on rental yields than capital gains.

Combined with an elevated interest rate environment, people's long-term house price expectations have changed. The potential for further tax policy shifts has also adjusted growth expectations. While we will eventually return to moderate growth rates, we are unlikely to see the exorbitant spikes of the past that created severe affordability imbalances. This accessibility is great news for families, though rising interest rates remain the short-term hurdle to watch.

Kelvin Davidson (00:16:52):
That summarizes it perfectly. First-home buyers are experiencing great success right now, but it is never easy, and interest rate challenges remain. Satish, thank you so much for joining me today. It is always a pleasure working with Westpac and gaining access to this valuable lending data.

To our listeners, please like, subscribe, and check out the full First Home Buyer Report. I'm Kelvin, he's Satish, and you've been listening to the New Zealand Property Market Podcast. Mā te wā.