Tighter mortgage rules could make it even tougher for first-home buyers

CoreLogic: Tauranga first home buyers are paying a median of $770,000 to secure a mortgage. Photo / Getty

Tauranga first-home buyers could face an even bigger mountain to climb to secure a home if new mortgage lending rules come into force.

CoreLogic's latest Market Pulse showed Tauranga first-home buyers are paying a median of $770,000 to get onto the property ladder.

But chief property economist Kelvin Davidson says new measures by the RBNZ to tighten loan-to-value ratios and bring in debt-to-income ratios could squeeze first-home buyers' wallets even harder.

The Reserve Bank has been consulting on reducing the share of owner-occupiers wanting to borrow more than 80 per cent of their purchase price from 20 per cent to 10 per cent of all bank lending.

Those are the people who can now borrow, even though they have less than 20 per cent deposit, loading up the most with debt compared with their incomes.

CoreLogic chief property economist Kelvin Davidson. Photo / Supplied

"They've been the ones taking the most advantage of the current rules."

Based on a calculation that assumes first-home buyers now need a 20 per cent deposit meant the extra deposit required from first-home buyers in Tauranga would be $77,000, Davidson said.

"Tauranga's first-home buyer share in Q2 was a bit lower (19 per cent), but that's actually quite high in relation to its own history – indeed, pretty much on a par with past peaks.

"So on the whole, both markets have a high presence for first-home buyers lately."

The Real Estate Institute of New Zealand's latest data showed Tauranga's median house price has dropped 1.1 per cent since June to $930,000.

Managing director of the Realty Group Ltd, which operates Eves and Bayleys, Simon Anderson. Photo / NZME

Simon Anderson, managing director of the Realty Group Ltd, which operates Eves and Bayleys, said anything making it harder for first-home buyers was not good for the market.

"We do want people owning their own homes in New Zealand and with the potential outlook for increasing interest rates is a double whammy."

Anderson said first-home buyers were still active even in the latest lockdown, with a few buying property via online auctions.

"They are still in the market."

Buying a home was a "big challenge" but getting onto the property has never been easy, he said.

"It's not the right of everyone. It is something you've got to work towards and plan for by investing, saving, decision making. It may be your option to purchase outside of Tauranga in a lesser median price area."

But Anderson said the issue was not the LVRs or interest rates, it was the low supply of houses. "There's still not enough houses."

REINZ regional director Neville Falconer. Photo / Supplied

REINZ regional director Neville Falconer said first-home buyer activity has remained steady.

"However, bank lending remains the longest part of the process."

Falconer said more Bay of Plenty properties were now selling for $1 million or more and making up 31.4 per cent of all sales in July up from 14.5 per cent of all sales in July 2020.

The median days to sell had dropped to 31 from 40 days at the same time last year.

"This is the lowest median number of days to sell for a July month since records began.

"Listings are expected to increase over the coming months as we approach spring
and the warmer months."

ANZ external communications manager Kristy Martin said banks still had some discretion to lend at a higher LVR.

"We will always work with our customers on the best approach based on their individual circumstances.

"We understand how hard it can be to get a foot on the ladder and are always looking at ways to help."

Martin said ANZ's Blueprint to Build offer launched in July gives first-home buyers a 2.76 per cent discount (taking the rate to 1.68 per cent off the standard floating rate for new builds or turnkey properties.

First-home buyers can also receive a $3000 contribution offer when taking out new lending, she said.

"It's in everyone's interests for residential property prices to be sustainable long term, and for home ownership to be accessible to as many people as possible.

"That's why last year we were the first bank to increase the LVR for investors in an attempt to balance out the market."

Meanwhile, Tauranga residents who resold their home in the second quarter of 2021 made a median profit of $437,500 per property.

The city's gross profit from resales between April 1 and June 30 this year was $188,046,504. No properties were resold at a loss.