First-home buyers hit hardest by property boom

by Roxanne Libatique02 Mar 2021

First-home buyers, especially those in Wellington, have been hit the hardest by rising house prices as they now need to save more to apply for a mortgage successfully, according to OneRoof.

OneRoof’s latest research calculated the extra money required for a 20% deposit using the current median property value in each region and comparing it to the median value 12 months ago. It revealed that New Zealand’s deposit requirements jumped by $28,000 to $153,000 in the last 12 months – and first-home buyers have it worse, with the amount they need to save growing $43,000 over the same period to $171,000.

“In a rapidly changing market, driven by low-interest rates and fear of missing out, it’s more important than ever to know what is exactly happening,” said OneRoof head Paul Maher.

OneRoof editor Owen Vaughan said first-home buyers in Wellington were hit harder than those in other areas as median house prices in the city have become unaffordable.

“The post-lockdown surge has definitely made it harder for first-home buyers. While the cost of servicing a mortgage has never been lower, deposit requirements have never been higher,” Vaughan said.

“The path to home-ownership is particularly steep in Wellington. Median house prices in the city have broken the $1 million barrier – way above what the government believes is affordable,” he continued. “Compare that to the situation in Christchurch, where first-home buyers in the city would typically only need a $107,000 deposit – up $27,000 in the last 12 months.”

First-home buyers in Invercargill and Queenstown Lakes were least impacted by the post-lockdown surge, with the typical deposit requirement in Invercargill increasing by only $15,000 to $64,000 due to the city’s low median property value of $395,000. Meanwhile, Queenstown Lakes’ deposit requirement increased by $16,000 due to the region’s economy bearing the brunt of the absence of international tourism and house prices struggling post-lockdown.

“While the rise in prices will frustrate many first-home buyers, it does show the benefits of getting on to the property ladder as a long-term investment,” Maher said.

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