First-home buyers show fatigue amid coronavirus outbreak – report

by Roxanne Libatique19 Mar 2020

The COVID-19 (coronavirus) outbreak continues to wreak havoc in New Zealand’s property market – and first-home buyers (FHBs) have started to show fatigue, according to CoreLogic’s latest report.

CoreLogic’s latest Buyer Classification report has revealed that FHBs’ 23% market share for the first two months of 2020 represented a dip from the usual.

Kelvin Davidson, senior research analyst at CoreLogic, clarified that the drop is not yet critical. However, house price growth and competition from investors might have started affecting FHBs.

“The world has changed dramatically on the back of COVID-19 in the past few weeks, and any stats relating to February are ‘out of date’ quickly. Indeed, we’re now staring down the barrel of a sharp recession and rising unemployment, which will knock property market confidence and will also hamper FHBs,” Davidson explained.

“Some landlords will have to face up to the risk of unemployed tenants and rental losses. These risks are greater in tourism-heavy areas like Queenstown and Rotorua, but nowhere is immune.”

Read more: Coronavirus could slow down house price growth – economist

The report showed that investors had maintained a healthy appetite for residential property in February despite the outbreak – with cash multiple property owners (MPOs) having accounted for 14.5% of purchases. Meanwhile, their mortgage counterparts took a 26.2% share.

“That’s the first time the combined market share has cracked 40% for almost four years. Low-term deposit rates are one factor that has pushed investors back towards property. [In contrast,] anecdotally, we’ve lately heard that the control an investor has over a rental property is another strong drawcard,” Davidson said.

“As we’ve noted previously, it’s the smaller investors that have come back to property the most strongly. Indeed, the share of purchases going to MPO 2s – or investors with two properties after their latest purchase – has recently climbed sharply to 9%.”

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