Will Raising Deposits for First Time Buyers Help Anyone?
Today I’m going to offer my thoughts on a current topic in the housing market that will affect both homebuyers and sellers alike. Higher deposits for first time buyers. The media is quite correct to say that the national median selling price is an at all time high, I have no complaints with that as it is factually true. However, what I would like to see is at least a tiny inspection as to why so that we can get an overall picture and not just a good soundbite, especially when a substantial part of the marketplace is about be penalised rather unfairly in my opinion.
The fact of the matter is that only 2 parts of the New Zealand housing market are driving the figures up meaning that first time buyers in the rest of New Zealand will now NOT be able to get a foot on the housing ladder. The 2 busy centres are Auckland and Christchurch. Christchurch simply because they are on a massive rebuild to replace what was tragically lost. Auckland though is a very different matter, the population growth in 2012 was huge. On TV3 news last December I saw John Key telling the interviewer that 72,000 Asian families moved to Auckland in 2012, I initially thought I misheard and through the power of MySky, I rewound to hear again his statement and prove I wasn’t going insane. As a comparison, the population of Upper Hutt is around 41,000 people.
The main driver of property prices has always been population growth, it’s not low interest rates, if that was the key then prices would have grown dramatically since 2008 instead of dropping as the interest rates since then have been the lowest in NZ history.
As a comparison to the Auckland market Wellington house prices rose by 2 per cent in the last 12 months, in some Wellington suburbs prices are lower than this time last year. So if that’s the case why then will first time buyers be punished in Upper Hutt and Wellington, and for that matter anywhere else in NZ for the issues caused by reasons not of their making? I do not believe the growing Auckland market is caused by first time buyers. I recognise that the Reserve Bank is trying to make changes to get the market “under control” but does anyone seriously think that raising the deposits on first time buyers will help anyone? If they can’t afford to buy the market stops, prices fall, consumer confidence crashes, people stop borrowing, those that can afford to at any rate. I think there are better things that can be done, what do you think?
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