As the debate over Australian housing price falls and the correct approach to negative gearing and the capital gains tax discount on existing homes continues, we have new hard evidence from New Zealand on the impact of housing crashes on demand from various different buyer cohorts.
Of all the major cities in New Zealand, Wellington has experienced the largest price falls since its peak in October 2021.
Since then prices have fallen by 30% and they continued to extend their falls in the latest data from the REINZ.
As housing prices continue to fall in Australia, there is a narrative that first home buyers aren’t going to buy; they won’t catch a falling knife in a market where prices continue to deteriorate.
But hard data from the New Zealand branch of Cotality paints a very different picture.
Instead of staying out of the market as prices continue to tank, first home buyers in Wellington are actually jumping in with both feet, with this cohort of buyers representing 37% of all home purchases in Wellington.
Source: Cotality
At a national average level, it’s a similar story, with an all-time high record proportion of home purchases flowing to first home buyers.
Source: Cotality
With 37.0% of homes in Wellington purchased by first home buyers and 29.0% nationally in New Zealand, the 21.8% share of new mortgages flowing to first home buyers in Australia appears deeply behind the curve by comparison.
While there is a popular narrative that first home buyers are not willing to buy into a falling market, an ever-increasing record number, based on Cotality’s data set, has been doing just that with eyes open since 2022.
The Takeaway
As Kiwi housing prices continue to fall and Kiwi first home buyers continue to get into the market in record proportions, we are left with a revealing conclusion: buying a house for these individuals is evidently first and foremost about having a home.
Prices may continue to fall, perhaps significantly further, they do not know for certain, but what they do know is they are securing a roof over their heads for themselves and their families.
This cuts to the heart of the current debate surrounding housing in Australia, as some commentators continue to rail against falling housing prices.
As the pushback continues against price falls, its worth reflecting on exactly what is being defended.
- Hostile conditions for first home buyers.
- Falling home ownership rates.
- Declining household formation rates.
- Lower fertility rates.
It needs to be asked: for what reason are conditions that are definitively bad for our society and its future being defended until the bitter end?
New Zealand shows that there is a different path, one in which first home buyers have a better shot at building a life for their families and ultimately, even the shot they do have is significantly more challenging than it was for their parents on average.
