Feature article
What’s going on for each buyer group at present?
First home buyers, relocators and investors.
The CoreLogic Buyer Classification data has recently been updated for December so we now have the full picture for 2024. Who fared well? Who was less active? And what might 2025 hold?
Reflecting on 2024
First Home Buyers
Last year was another strong one for first home buyers (FHBs), who made up 26.1% of property purchases. That was a new record high, surpassing the previous mark of 25.7% set the previous year. Granted, at around 20,850, the number of FHB purchases had been beaten previously, but it was still a solid year on that measure too.
Why have FHBs proven successful? Access to KiwiSaver for at least part of the deposit is one factor, while they have also been making full use of the low-deposit lending allowances at the banks. Getting around the loan-to-value ratio rules by purchasing new-build properties is another popular option at present, and we estimate that FHBs accounted for about 27% of new-build activity in 2024. FHBs have also been enjoying plenty of choice (total available listings are high) as well as the soft market – indeed, their median price paid in 2024 was $698,000, down from $719,000 in 2022.
Relocators
By contrast, movers (or relocating owner-occupiers/next-home buyers) ‘only’ accounted for 26.5% of activity last year, which is about 2%-points below their average. Confidence amongst this group has been relatively low, and lengthy housing chains (everyone’s deal needing to settle to allow others to move too) have just generally made the buying and selling process more challenging.
Multiple property owners
At the same time, mortgaged multiple property owners (MPOs including investors) have had a quieter few years too, with their share of activity at 21.7% in 2024, versus the average since 2005 of around 24.5%. That is not surprising given that typical mortgage rates were above 7% for at least the first half of 2024, meaning that significant top-ups out of other income were required to sustain the cash flow on a standard new rental purchase.
Looking ahead to 2025
Our expectation is that overall property sales volumes will rise from around 80,000 in 2024 to 90,000 in 2025, reflecting the lagged effects of lower mortgage rates and the anticipation of a growing economy again, albeit slowly. That said, further job losses in the near term are unfortunately looking likely, and debt to income ratio limits will also become a consideration. Although the ‘generous’ 20% spend limit and the new-build exemption should mean they don’t put a hard stop on activity.
In this environment, it would not be a surprise to see a higher number of deals from all buyer groups, especially the three main cohorts of FHBs, mortgaged investors, and movers. Indeed, there are already stronger signs from mortgaged investors, primarily smaller/new buyers (those who now own two properties in total after their latest purchase), or the cliched ‘Mums and Dads’ – that reflects lower mortgage rates, which may have reduced ‘typical’ weekly top-ups from about $350 to $200.
Keep in mind, however, that market share across all the buyer groups must always equal 100%, and even though FHBs will likely buy more properties this year than last, it is still conceivable that their percentage share of activity will drop back from recent record highs, as mortgaged investors and movers return closer to their normal positions. But as an example, FHBs could see their market share drop to 24% this year and still purchase about 1,000 more properties than in 2024.
Author
Chief Property Economist, Cotality - cotality.com
Kelvin joined Cotality (previously CoreLogic) in March 2018 as Senior Research Analyst, before moving into his current role of Chief Economist. He brings with him a wealth of experience, having spent 15 years working largely in private sector economic consultancies in both New Zealand and the UK.
In his role with Cotality, Kelvin’s focus is on keeping up to date with what’s going on in the property market and continually finding different ways for viewing and interpreting it. Kelvin’s economics background means that he knows his way around a spreadsheet, but more importantly he always puts more emphasis on providing the key insights and telling a story, whether his audience be clients or the media.
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