Some buyer groups have passed "peak pessimism," new data shows
While the market remains “pretty quiet” in terms of the number of property sales, CoreLogic’s Buyer Classification data for August has suggested that some buyer groups, especially first-home buyers, have passed “peak pessimism.”
Compared to the long-term average for August of around 7,800, there were only 5,250 deals made in August. Of these property purchases, first-home buyers accounted for 25% – their highest market share since December last year, and up steadily over the past four to five months from the trough of 21% in March.
Kelvin Davidson, CoreLogic chief economist, noted that LVR rules have continued to prevent would-be buyers from making a purchase. There were also those who willingly held back in hopes of getting a cheaper price – and a better house – later down the track.
“However, others have clearly remained keen to buy, perhaps recognising ‘picking the bottom’ of the market is difficult, and in the meantime, they might also miss out on a house they really like,” Davidson said. “The easing of the CCCFA rules in recent months (with more to come in 2023) may have helped too, alongside the raising of the price caps for First Home Grants and the removal of caps for First Home Loans. The recent increase in the cap for KiwiBuild homes might also allow developers to bring forward more of these properties, improving options for would-be FHBs in the coming months too.”
Read next: First-home buyers' withdrawal from market eases as govt announces tweaks to lending law
Meanwhile, the market share for cash multiple property owners (MPOs) has also increased to 14-15%, from around 9-10% late last year.
On the flipside, mortgaged MPOs have seen their market share fall to a record low of 21% in August.
“Generally speaking, this buyer group is facing pressure from the pincer movement of low rental yields (and slowing rental growth) and higher mortgage rates, as well as the stringent 40% deposit requirements,” Davidson said. “It’s probably also worth noting the returns on potential alternative assets, such as term deposits, have risen too.”
Relocating owner-occupiers, or movers, on the other hand, have also pulled back a little lately in terms of market share. Aside from needing that bit of extra cash to trade up, the change in market circumstances and the return of more conditional offers serve as barriers to would-be buyers.
“Generally speaking, cash MPOs have had a rising market share, FHBs have also been increasing (in % terms), while mortgaged MPOs have had a reduced presence,” Davidson said. “Overall, it’s clear that the property market still faces some challenges and mortgaged MPOs, in particular, seem to be finding it tricky to get the sums to stack up at present. However, FHBs seem to have been taking a few more opportunities in recent months – potentially signaling a change in mood/mindset about the outlook, and adding to the prospects the wider downturn may end in 2023.”
