Reserve Bank's tactics of limiting number of low-deposit loans is affecting first-home buyers, study shows, and is rapidly changing the landscape of the Auckland property market as some suburbs surge ahead.
The proportion of house sales to first-home buyers has gone down in 90 Auckland suburbs since the Reserve Bank's mortgage lending limits came in, according to a Herald analysis of 168 suburbs.
The detailed figures, provided by property data company CoreLogic, show the most up-to-date, suburb-by-suburb look at the number of first-home buyers - and the number of home buyers overall - in the three months before the new limits came in on October 1 (June-August), and the first three months of this year (January-March).
The company defined a first-home-buyer transaction as one where none of the new owners have owned property in New Zealand previously, and where the owners have also taken out a mortgage. The figures include apartments.
First-home buyers made up 20.9 per cent (2497) of the the total 11,933 home sales in the surveyed period before the loan-to-value ratio (LVR) changes.
The changes restrict the number of mortgages banks can give to borrowers who have a deposit of less than 20 per cent of the home's price.
The proportion of first-home buyers dropped to 18.8 per cent (1616) of the total 8573 sales after the changes, a fall of 2.1 percentage points.
The changes aim to cool rapidly rising property prices - the latest Real Estate Institute figures show Auckland has reached a record median high of $637,000 - but they have been criticised for unfairly affecting first-home buyers who would find it more difficult to raise a 20 per cent deposit.
CoreLogic's information shows suburbs with the biggest decreases in first-home buyers were Farm Cove (-31.3 percentage points), Sunnyvale (-30.7) and Lynfield (-30.1).
Farm Cove had few sales to start with but first-home buyers had made up more than half of all sales in Sunnyvale and Lynfield before the LVR changes.
Some suburbs saw no sales to first-home buyers after the change, but they were areas which already had few sales because of high property prices, or were not typically favoured by young buyers because they are located further from the city. They were: Albany Heights, Eastern Beach, Farm Cove, Karaka, Omaha and Wellsford.
Nine suburbs had only one sale to a first-home buyer before the change, while one suburb had none (St Marys Bay).
The lowest number of overall buyers after the changes were Eastern Beach (10), Muriwai (10), Morningside (11) and Wellsford (11).
The proportion of sales to first-home buyers went up in 75 suburbs.
Suburbs with the highest rises were all in South Auckland: Red Hill (up 22.4 percentage points), Totara Heights (18.6) and Manukau (17.3), indicating the new-buyer market is looking for cheaper options further from the city. The highest number of first-home buyers after the changes were in Henderson (48), Massey (45) and Manurewa (42). Previously they were in Papatoetoe (81), Massey (77) and Henderson (74).
If calculating the percentage of first-home buyers out of total buyers, the top suburbs were Avondale (40.5 per cent), Red Hill (40 per cent) and Bayview (36.2 per cent). Before the LVR changes they were Sunnyvale (52.2 per cent), Lynfield (52 per cent) and Otahuhu (39.8 per cent).
The highest number of overall buyers before the changes were Auckland Central (747), Papatoetoe (299), Manurewa (297) and are now Auckland Central (430), Flat Bush (209) and Remuera (206).
Matt Yang, of Don Ha Real Estate, which sells in the Manukau region, said because loans for new builds were exempt from the LVR rules, Takanini, where there was mass housing development, was attracting more and more first-home buyers.
"We've sold so many housing packages ... Takanini is going really hot because all those brand new houses are in the $500,000 to $550,000 bracket," he said.
"In that area there's more and more subdivisions coming up - there's a Warehouse coming and it's surrounded by retail shops, cafes and offices."
People weren't necessarily changing jobs, but accepting longer commutes, Mr Yang said. "They're still working in town but they want their own house, their own land, not renting anymore."
But fewer new-home owners were buying in Flat Bush because development had driven prices up, Mr Yang said.
"With the new shopping mall going up, the prices around there started going crazy. Some of the houses have already reached the $1 million mark."
He said he had also noticed larger numbers of Asian buyers looking south.
"The Asian market was only focused on central Auckland or on the North Shore. But now, because of the price going up pretty high in those two areas, they're looking in the first-home market ... maybe in Massey or Henderson."
Mortgage broker Bruce Patten, of Auckland-based Loan Market, said rural areas such as Pukekohe and Pokeno were surging in first-home buyer interest with many taking advantage of the new builds LVR exemption. Others were concentrating on established homes in Manukau, but some still didn't want to stray too far from the city.
"There are some people that are prepared to do that, but there are others that would never consider it. It all comes down to the individual. It's quite mixed on that front."
While there was a noticeable drop-off in first-home buyers, the company was offering the same number of loans, he said.
"Any drop seems to have been counteracted by the fact we have more people investing at the moment ... in fact, we had our biggest month last month. That tells me there's plenty of activity still out there."
Home buyers borrowing from their parents to help fund their deposits was popular, Mr Patten said. He pointed to new seminars being held by ANZ for parents on how to help their children get into the market.
Shamubeel Eaqub, principal economist at the New Zealand Institute of Economic Research, said he did not think there was enough data yet to calculate the overall effect of mortgage lending restrictions.
"It's not surprising that you have that drop-off [in first-home buyers] because you'd expect that on the back of LVR restrictions. What are we trying to achieve with the LVR restrictions? The really big issue is to try to create less risk for the financial system and reduce total borrowing growth and the rate in growth of house prices. From that perspective, to me it's not quite clear that the policy's had the desired effect."
He said the trend in mortgages, credit growth and house sales were similar to what we'd seen in the last 12 to 18 months. "I'd be on the sceptical side because I don't think we've seen enough data yet to be convinced that it was the policy itself that was creating the big change."
He said a clearer picture would emerge later in the year, but rising interest rates and other factors needed to be accounted for.
Couple set for new challenge after sale
Bond St, Grey Lynn
Bought: $604,000 in October 2010
2 bed, 1 bath
331m2 section 80m2 floor
When Callum and Lindy Malcolm were first-home buyers in 2010, they had the pick of the market.
The country was recovering from a recession, house prices had dipped, and there was still plenty of properties to choose from.
It was between the Malcolms and one other couple at the auction for their two-bedroom Grey Lynn villa.
In the end, the former paid $604,000 for the 1900s do-up, which has a floor space of just 80sq m.
Even then the price was at the upper end of the scale as the suburb slowly rose in price. But four years later, the couple have sold again for $835,000 - 30.4 per cent or $195,000 above the valuation of $640,000, which was set in 2011.
They carried out extensive renovations, putting in a new bathroom and kitchen and painting throughout.
They are hoping to buy a much bigger property for their expanding family on the outskirts of the city.
"Maybe on the North Shore or out west, where we can get a bit more value for your money," Mrs Malcolm said.
When they bought, Mrs Malcolm, now 32, was working as an account manager in the food industry and her husband, 33, for a bank. Mrs Malcolm is now on maternity leave with their 1-year-old daughter Addison. She said the couple might have struggled to buy the home if the Reserve Bank's mortgage lending restrictions were in place in 2010 and property prices were as high as they are now.
"If we were looking in the same area now as first-home buyers, we'd need a bigger loan, and getting a bigger mortgage is not at all appealing to us."