Valocity’s new build investigation – What properties do first home buyers own?

Brought to you by the Valocity Research Team: Wayne Shum and James Wilson

Executive Summary

New Zealand homeownership rates have declined from 73.8% in 1991 to 64.5% according to the 2018 census. In the 2018 census, 32% of households were living in rental properties. Whilst many New Zealanders still aspire to own their own homes, there remains substantial barriers to becoming a homeowner;

Record high prices, which also equates to higher deposit requirements and higher mortgage repayments
The rises in the market in recent years have outpaced the aspiring owner’s ability to save for a deposit

The Valocity Research team wanted to look into those who have succeeded in taking the first step on the ladder – First Home Buyers, to understand what properties they are purchasing to get into the market.

Does the traditional Kiwi dream of a detached suburban home on a quarter-acre site remain realistic?

What properties have First Home Buyers been purchasing?

Across New Zealand, the overwhelming majority of First Home Buyers have purchased a detached dwelling for their First Home. The proportions however are lower in Auckland, Canterbury, and Wellington; where a high cost of land means detached dwellings were generally cost-prohibitive for some First Home Buyers.

	Apartment	Dwelling	Flat / Townhouse
Auckland	8%	68%	24%
Bay of Plenty	1%	94%	5%
Canterbury	2%	83%	15%
Gisborne	0%	96%	4%
Hawke’s Bay	1%	94%	5%
Manawatu-Whanganui	0%	95%	5%
Marlborough	0%	90%	10%
Nelson	3%	94%	3%
Northland	0%	94%	6%
Otago	3%	88%	9%
Southland	0%	97%	3%
Taranaki	1%	93%	6%
Tasman	0%	98%	2%
Waikato	0%	92%	8%
Wellington	5%	75%	20%
West Coast	0%	99%	1%

Table 1: Composition of First Homes

First home characteristics

Interestingly, the average size of the home and the number of bedrooms purchased were similar across New Zealand. The most significant difference for First Home Buyers across the country was section size; the quarter-acre dream was only alive for First Home Buyers in Northland. The smallest section sizes were in Auckland and Wellington, where land cost was also the highest. The trend was more pronounced in Auckland, where the Unitary Plan has encouraged the more efficient use of land. This has lead to an increase in development of apartments and townhouses, with little to no exclusive land area.

As for the age of the homes purchased, these tended to be older in regions with little building activities in recent decades such as Southland, West Coast, and Gisborne. Auckland’s First Home Buyers enjoy the newest homes.

	Average Year Built	Average Land Area (sqm)	Average Floor Area (sqm)	Average Bedroom Numbers
Auckland	1989	366	133	3
Bay of Plenty	1983	553	134	3
Canterbury	1978	533	135	3
Gisborne	1955	797	119	3
Hawke’s Bay	1961	722	125	3
Manawatu-Whanganui	1962	853	125	3
Marlborough	1968	800	127	3
Nelson	1973	563	126	3
Northland	1975	1,178	134	3
Otago	1961	669	130	3
Southland	1957	841	130	3
Taranaki	1965	744	135	3
Tasman	1981	864	140	3
Waikato	1980	595	131	3
Wellington	1972	503	123	3
West Coast	1950	933	127	3

Table 2: Characteristics of the First Homes

How much are first home buyers paying?

It is a common belief that First Home Buyers buy cheaper homes to get on the property ladder. While they may own dwellings with values below the regional averages, their homes are above the lower quartile values, which indicates that they are forced to compete with other buyer groups in many locations.

Valocity have investigated the characteristics of the dwellings owned by First Home Buyers who purchased in the past 12 months.

To ensure results remain comparable, Valocity have compared the average values for dwellings across NZ’s regions;

	FHB Dwelling (sqm)	All Dwelling (sqm)	Floor area size difference	Average FHB Dwelling Value	Lower Quartile Dwelling Value	Average Dwelling Value	FHB Difference to average value
Auckland	151	168	-10%	$1,279,000	$1,040,000	$1,545,000	-17%
Bay of Plenty	136	155	-12%	$757,000	$635,000	$914,000	-17%
Canterbury	143	161	-11%	$602,000	$495,000	$677,000	-11%
Gisborne	120	129	-7%	$594,000	$435,000	$629,000	-6%
Hawke’s Bay	127	144	-12%	$702,000	$605,000	$815,000	-14%
Manawatu-Whanganui	127	143	-11%	$575,000	$470,000	$619,000	-7%
Marlborough	130	155	-16%	$594,000	$550,000	$708,000	-16%
Nelson	129	153	-16%	$710,000	$630,000	$831,000	-15%
Northland	137	145	-6%	$622,000	$495,000	$718,000	-13%
Otago	134	155	-14%	$662,000	$515,000	$806,000	-18%
Southland	131	146	-10%	$402,000	$630,000	$444,000	-9%
Taranaki	137	156	-12%	$533,000	$495,000	$610,000	-13%
Tasman	142	158	-11%	$745,000	$655,000	$823,000	-9%
Waikato	133	147	-9%	$725,000	$610,000	$837,000	-13%
Wellington	134	154	-13%	$969,000	$810,000	$1,084,000	-11%
West Coast	127	128	-1%	$308,000	$205,000	$311,000	-1%

Table 3: Values and Characteristics of Dwellings

Conclusion

First home buyers do not only buy the “lower quartile” of properties in an area to enter the market, they are forced to purchase properties closer to the average value.
Auckland First Home Buyers own the most expensive First Homes in the country,
Homes owned by first home buyers in Auckland are generally more modern than the rest of the country, however, section sizes are smaller.
The value differential is largest in the main centres, in areas like West Coast, Gisborne and Whanganui. The value difference is relatively minor; potentially these regions are not as sought after by First Home Buyers or competition among other buyer groups is lower
The quarter-acre dream is only alive in the Northland region. Across the rest of New Zealand, section sizes were much smaller and likely to shrink further as these regional centres urbanise.
FHB in Auckland, Wellington and Christchurch were more willing to accept apartments and townhouses in their buying behaviour. This is likely to be fuelled by intensive new residential developments in these locations. Also, the cost of land in Auckland and Wellington means it is more cost-prohibitive to buy detached homes as a First Home than in other areas.

For further information or if you would like to understand more about first home buyers, please contact wayne.shum@valocityglobal.com or james.wilson@valocity.co.nz.