NZ mortgage trends in 2019

March 01, 2019 at 3:12 PM

By Christine Lockie

The first two months of 2019 have already been eventful for the New Zealand property market:

  • Relaxation of loan-to-value restrictions
  • The Tax Working Group report and proposals on capital gains tax
  • The introduction of new minimum standards for rental properties 
  • A slowdown in house prices as foreign investor restrictions take effect.

For first home buyers, many of these changes will work in their favour. The LVR restrictions have eased for a start, allowing banks to allocate 20 per cent of their loan portfolio to those with deposits of less than 20 per cent. House prices in many regions have plateaued, and this is likely due to a number of factors, including:

  • Foreign ownership restrictions
  • Lower levels of immigration
  • An increase in new house and apartment developments

The Official Cash Rate (OCR) remains at 1.75 per cent, but there is some speculation that we could be in for a rate cut this year, which could lead to lower mortgage rates. We’re also seeing increased competition between the banks, which can only be good for those seeking home loan finance. One potential spoiler would be a sudden sharemarket correction – which could see interest rates rise. 

So, what other trends will influence first home buyers in 2019?

Unemployment remains low, and the economy is in relatively good shape compared to other countries. This stability benefits first home buyers, as they can approach their home purchase with more confidence. Banks are more likely to lend too, when economic conditions are favourable.

Unfortunately, for buyers, the drop in house prices has mostly been seen in the higher price bracket and on average, house prices remain very high relative to incomes.  

The flat market may dampen enthusiasm from investors, as it indicates they are unlikely to enjoy the rapid capital gains of the last five years. This could be good news for first home buyers, as it means less competition for entry-level housing.

First home buyers do need to factor in the possibility of further property price drops, which could see them slip into negative equity until they pay off more of their loan. This seems an unlikely scenario in Auckland, with a scarcity of affordable housing; however, we do recommend you seek professional advice from your real estate agent and mortgage advisors like LoanPlan before you purchase.

Kiwibuild is off to a slow start, and continuing troubles in the construction industry are holding back progress in building up NZ’s housing stock. However, the situation is better in Auckland, with a considerable increase in new home consents over the past year, the highest since 1975. 

Even better for first home buyers—most of these dwellings are townhouses, flats and units. According to a report put out by property analysts CoreLogic—25 per cent of all Auckland homes sold last year were bought by first-time buyers, at an average price of $856,467.

As we’ve seen in previous property cycles – when the market is flat, sellers often just remove their property from the market—and sure enough, there was a 13 per cent drop in listings last year. This means the availability of new houses and apartments is likely to be a defining factor for those looking to buy their first home in Auckland this year.


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