First home buyers are on the rise across New Zealand, with new buyers enjoying a record share of mortgage money despite a recent drop in overall housing finance. According to figures from the Reserve Bank of New Zealand (RBNZ), national mortgage values were worth $5.371 billion in December 2018, which is $300 million more than a year ago and $850 million down from November. First home buyers made up 17.2 percent of the overall market with $924 million borrowed over the month, which is the highest level recorded since RBNZ started publishing data back in August 2014.

In other data from RBNZ, other owner occupiers represented $3.445 billion of the mortgage market, investors accounted for $949 million, and business loans were recorded at $53 million. Higher than 80 percent LVR lending was worth $493 million in December, including $334 million for first home buyers, $155 million for other owner occupiers, and $3 million for investors. As you might expect, first home buyers are over-represented in this category due to low savings and a lack of equity.

A reclassification of data by one bank from “investor” to "other owner occupied" has led to a long-term reduction in what were previously classified as investor loans, with this change made in October 2018. While RBNZ doesn't say which bank is responsible for the change, this date is precisely when the money going to investors dropped significantly from over 20 percent to around 17.5 percent. Despite this change, the rise in first home buyer numbers has been attributed to multiple factors, including increased housing supply and decreased migration.

While housing stock numbers were still down nationally in December, they were up in Auckland by 4.5 percent on an annual basis. According to Westpac Senior Economist Satish Ranchhod, the number of new dwellings being constructed in Auckland may even be able to support the current level of population growth. New figures from Statistics NZ suggest lower migration numbers than previously expected, with long term migration settled at 43,000 rather than almost 65,000 under the old system. 

According to Ranchhod, "For some time, we have been highlighting that the rate of dwelling construction was catching up with population growth... We predicted that that as population growth slowed, housing shortages would begin to ease in the coming few years, and therefore the outlook was for moderate growth in construction activity... These data revisions [by Statistics NZ] reinforce that view. While the new figures are really just a change in the way long term migration is measured, the housing shortage in Auckland may be around 20 percent smaller than originally thought.

According to a new ASB survey, house buyers in Auckland are increasingly confident that prices won't rise, which could lead to an even greater number of first home buyers. While 23 percent of national respondents expected house prices to rise, this number was much lower in Auckland at just 8 percent. This is the equal lowest figure in Auckland for nine and a half years, which should highlight just how big the current cycle is. "House price growth expectations shifted unevenly during the quarter, falling significantly in Auckland and dipping slightly in the rest of the North Island, but ticking up by a whisker in the South Island," said ASB chief economist Nick Tuffley.

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