Kelvin Davidson: Cotality NZ Chief Property Economist on first home buyers entering the property market

Investors may sit back and wait for further cuts to the Official Cash Rate as first home buyers surge into the housing market. 

The Cotality Monthly Housing Chart shows first home buyers account for 27% of market activity in July – the highest proportion in 20 years. 

The Reserve Bank this week cut the OCR another 25-basis points to 3%. 

Cotality NZ Chief Property Economist Kelvin Davidson told Mike Hosking first home buyers are taking advantage of a quiet market as others hold off. 

He believes a reason people are waiting is job uncertainty and the labour market. 

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Episode Transcript

Speaker 1 (00:00):
Good news on housing. Very happy days for the first
time buyer. At the moment got a twenty seven percent
market share. Now that is the highest in twenty years.
Long term average is twenty one to twenty two percent.
Kelvin Davidson is the chief property economist to Totality and
he's with us Calvin Morning, Good morning. So rates are down,
we're in like robbers dogs. Is that how that works?

Speaker 2 (00:19):
Well, I mean first time buyers certainly are. Yeah, but
I mean first time buyers have been a success story
of the market for a while there. Actually they're taking
advantage of lower rates, but tapping in the kiwisaver that's
been part of it, and also tapping into low deposit
learning allowances at the banks. There's definitely some things in
their favor at the mark.

Speaker 1 (00:37):
Are the investors still on the sideline hence helping the
choice for the first homer.

Speaker 2 (00:41):
No, investors are definitely coming back. So they've had a
tough couple of years, but a few roll forward to
the most recent sixty nine months, I'd say that they're
really getting back in. And I mean tax rules have
shifted back in favor of property investment. But for me,
the big thing there is sort of the lower mortgage rates,
the top ups, the cliched moment that investor would have
to put in has gone down a lot, and it's

(01:03):
very visible, real cash for them. So yeah, they're returning.

Speaker 1 (01:06):
To good And this is all over the country or
cheaper parts of the country, all where.

Speaker 2 (01:10):
Well, it's pretty broad based. So the first time buyer
is a pretty strong ifeware and investors are suddenly coming
back to Right across the board, Auckland, despite the fact
that the Auckland house prices are high and approach the
rental yields are a bit lower than elsewhere. Auckland's been
a strong market for investors in the last six to
nine months too. So yeah, that's pretty much across the board.

Speaker 1 (01:30):
What do you do see? Two more cuts are coming.
He didn't confirm them, but he hinted they maybe as
of this week. So if you've got two more you
sort of are you sitting here? You a bit sort of?
Maybe maybe I'll wait.

Speaker 2 (01:40):
Well, I mean, I think we'll see that pass through
to some more interest rate cuts at the longer rate cuts,
I mean, at the the shorter end of the curve.
But I suppose the thing that people are just waiting
for at the moment is around the economy, around the
labor market, particularly sort of job uncertain downing. That's probably
keeping some people on the sidelines. But role Ford the
early part next year, unemployment rate starts to come down,

(02:02):
leg defective interest rates comes through. I think there's some
reasons to be more optimistic.

Speaker 1 (02:07):
Fantastic, Calvin, Well, you have a good weekend. We love optimism.
I felt like Nikola Willis told me off this week.
Did you feel the same way when she talked about
patriotism and getting out there and talking about the economy
and the naysayers and stuff. I thought, I'm being told
off here. Calvin Davidson, chief property economist at Curtality. By
the way, B and Z tell us that the average
new borrower is two hundred and seventy dollars a month

(02:28):
better off. Average mortgage rate paid in June was five
to sixty six, down from six to thirty nine. Likely
the average is going to go down to about five
by the end of the year. So at a rate
of sixty thretey nine, your average first timer mortgage of
five seven five was paying three and a half grand
a month or right twenty nine a week. Versus thirty
three hundred hour or seven hundred and sixty seven a week,

(02:50):
so you are feeling better. And I note this morning
in Britain, for the first time in many years, the
average first home mortgage is four point nine, so they're
doing a little bit better than us, but not as
I gave it to thirty year number of America. It's
we're better than America, but not as good as Britain,
if that makes any difference to you.

Speaker 2 (03:09):
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