According to a CoreLogic report released on Thursday, the share of first-time home buyers has risen to a record high.
This high of 27 per cent might be encouraging for other potential first-time buyers, but any cause for optimism is likely to be cancelled out by future house price rises and high interest rates. Michael Reddell, an independent economic commentator, has forecast we can expect house prices to rise by up to 9 per cent in the coming months, making the market even less affordable.
Forecasters on the panel of the Reserve Bank have said there are several factors contributing to increasing house prices. For example, the panel believes that proposed tax changes for foreign buyers and landlords have contributed to the upward pressure on house prices by increasing demand.
Another driving factor is believed to be immigration which reduces the availability of existing properties. According to Westpac, New Zealanders can expect to see house prices increase by 8 per cent in the next 12 months as population levels boom.
Infometric’s Gareth Kiernan said the home buyers currently need to take on a ”daunting” level of debt to own a home, regardless of recent falls. He went on to add that instead of it being a question of whether house prices will rise, it was more a matter of by how much.
Kiernan also stated that more housing is clearly needed and something needs to be done to address the current shortage of homes. He was also hopeful that a new government initiative to allow more flexibility in the funding of new house builds would help increase property vacancies.
However, Kiernan also goes on to acknowledge the government’s initiative won’t be a quick fix, and borrowers can expect things to remain tough for the foreseeable future. He also points out that this continued growth in house prices is unsustainable and must reach a peak at some point.
For example, house shoppers are limited by what they can afford, potentially leaving homeowners unable to sell their property if they value it too high.
Regardless, Kiernan did reveal a glimmer of hope on the horizon, suggesting that house prices could start reversing in 2025. He also expressed some frustration at the Reserve Bank which, according to Kiernan, should be concerned. However, Kiernan also said the Reserve Bank appears to believe the housing marketing is close to sustainable so it’s unlikely to concern them any time soon.
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