Similar drop in first-home buyers across Tasman suggests high house prices to blame

A fall in the number of first-home buyers in the housing market is an issue in Australia as well, which suggests rising prices are to blame, rather than the Reserve Bank's mortgage restrictions, says Finance Minister Bill English.

The Reserve Bank and Government have come under fire over the loan-to-value ratio (LVR) limits on buyers with less than a 20 per cent deposit which took effect at the beginning of October, with critics saying they are hitting new home building and forcing first-home buyers out of the market.

BNZ chief economist Tony Alexander says first buyers are "deserting the market" with a net 78 per cent of real estate agents regularly surveyed by the bank reporting they are seeing fewer first-time buyers.

"This result supports data from other sources showing first-home buyers giving up hope of making a property purchase in the near future," Mr Alexander said.


Mr English yesterday acknowledged Mr Alexander's comments but noted recent reports on the Australian housing market showing a sharp drop in first-home-buyer participation.

Australian media last week reported first-home buyers accounted for just 6.8 per cent of new housing loan commitments in New South Wales in September, well down on the peak of 34 per cent four years ago.

Across Australia, first-home buyers accounted for 12.5 per cent of new housing loans during the month.

"That's in a market that's got a capital gains tax, a restriction on foreign buyers and it doesn't have any LVRs," Mr English said in a comment aimed at parts of the Opposition's answer to rising house prices.

"So the experience there is remarkably similar at a remarkably similar time. I don't quite understand why, but what it tells you is that the real problem for first-home buyers is the affordability of the housing, not the LVR restrictions although they have some impact in the short term, no doubt about that.

"Yes, there is some pressure on first home-buyers from the LVRs but I think the Australian figures show that underlying that is the problem of just housing markets that are very expensive."