The number of houses bought by first home buyers dropped nationally to 21.5% in the first quarter of this year from 24.8% six months ago.

It is the lowest since the first quarter of 2018.

CoreLogic senior economist Kelvin Davidson says the figures hint at “fatigue” and a growing struggle to keep up with other buyer groups, ever-rising deposit requirements and property values.

Never before seen data developed by Equifax and CoreLogic shows – perhaps contrary to popular belief – the average age of first home buyers has not risen markedly in recent years.

After dipping from 35 to 34 in 2017, the national average has held steady at that figure ever since.

First home buyers in Auckland are 35 years old on average, 34 in Wellington and Tauranga.

They are even younger – 31 – in provincial areas like Manawatū, Masterton, Rangitīkei and Tīmaru, where property values are generally lower and affordability measures less stretched.

“Based on the data, the Government would probably say its intervention to discourage leveraged investors from buying existing properties and help first home buyers has been well timed,” says Davidson.

He says among the possible reasons for the average age of first home buyers holding steady, despite growing affordability pressures, are earlier access to larger KiwiSaver pots, a willingness to move further afield or look at different or cheaper property types, as well as help from parents or family.

“First home buyers may also have begun to save earlier than in the past.”

Historically first home buyers’ share of purchases has been affected at certain times by loan to value ratio (LVR) restrictions.

“Owner-occupiers are now required to have a 20% deposit, although the banks can, of course, make use of the Reserve Bank-mandated speed limit and allow up to 20% of owner-occupier loans (including first home buyers) to be made at less than a 20% deposit.

“On that note, there is evidence some would be first home buyers have become so disenfranchised or discouraged they are giving up on buying.

“Mortgage data, however, shows about one-third of first home buyer loans in March this year were done at less than a 20% deposit.

“There is more flexibility in the lending market than many may think,” says Davidson.

Shift in prices being paid

Across the country, houses accounted for 75% of first home buyer purchases in the first quarter of this year.

This was down from 77% in the calendar year 2020, but still higher than the latest figure for all buyers of 72%.

Even with Government intervention potentially freeing up opportunities for first home buyers to access existing properties with less competition from leveraged investors than before, they will probably face more competition for new-builds, a segment they have shown interest in recently, says Davidson.

In the first quarter of this year, first home buyers paid a median price of $650,000, higher than the 2020 calendar year figure of $576,500, but less than the Q1 2021 all-buyer figure of $725,000.

That said, the first home buyer median in the first quarter of this year of $650,000 was still well above the all-buyer lower quartile of $510,000, illustrating first home buyers don’t always start at the bottom and work their way up.

Davidson says as was the case at the national level, first home buyers in each of the main centres paid a median price in the first quarter of this year that was lower than for all buyers.

Reflecting the fact that it has the highest prices to start with, the gap was largest in Auckland, with first home buyers paying a median in the first quarter of $877,000. This was $133,000 less than the figure for all buyers of $1.010 million.

The gap was also more than $100,000 in Tauranga, although the median price actually paid by first home buyers was higher in Wellington – $770,000 versus $699,000 in Tauranga.

Davidson says the standout centre is Christchurch, where the first home buyer median price paid is still below $500,000, lower than in many provincial areas.

“The relative affordability in the country’s second-largest city is so much better than anywhere else, and especially appealing for first home buyers because the city’s business community is established and jobs are on offer.”

Around the provincial areas, the highest median price paid by first home buyers in the first quarter was in Waipā at $705,000, and the lowest in Wairoa at $239,000.

First home buyers in Tasman, Thames-Coromandel, Central Otago, Western Bay of Plenty, and South Wairarapa paid a median price of $600,000 or above, while Grey and Buller joined Wairoa in the sub-$300,000 group.

Rent vs mortgage repayments

Based on the median price paid by first home buyers in the first quarter, and assuming an 80% loan to value ratio mortgage – and a 2.5% mortgage rate – fortnightly loan repayments have been calculated nationally and for each of the main centres, then compared to the typical fortnightly rent in each area.

“It is cheaper for a first home buyer to pay the mortgage, excluding other ownership costs such as rates and insurance, than to rent in Christchurch, with only a +$44 gap in Dunedin.

“Nationally, it costs $101 more per fortnight for a first home buyer to pay their typical mortgage than to rent,” says Davidson.

“Looking at the big picture, 2019 was dubbed the ‘year of the first home buyer’, and 2020 the ‘year of the investor’, but that didn’t detract from first home buyers faring well in 2020, when their percentage share of purchases rose to a record high of 24.8% in the third quarter.”

Davidson says since then the sheer weight of investor demand in the market that has continued into 2021 has seen first home buyers’ market share dip back to 21.5%.

“Clearly, investors/landlords are vital to a well-functioning property market, but accessibility for first home buyers is also critical.”