Why First-Home Buyers Are Snapping Up Standalone Homes | Week in Review

First-home buyers are quietly rewriting the rules of the New Zealand property market. Despite a flat wider economy, a record 75% of first-home buyer purchases this year are standalone houses—the highest level since 2020.

But as the market continues to fragment, we are seeing a fascinating regional split. While Auckland and Wellington face slower movements, areas like Southland, Taranaki, and Otago are showing surprising resilience. Meanwhile, mortgage arrears are falling, but financial hardship applications are spiking—pointing to a deeper credit squeeze on middle-aged Kiwis.

In this episode of the Week in Review, Debbie Roberts (Financial Adviser at Property Apprentice) breaks down the five critical economic shifts shaping your property choices right now.

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KEY ECONOMIC INSIGHTS COVERED:

• The Cotality Westpac New Zealand First Home Buyer Report reveals that standalone homes are back in fashion, making up 75% of FHB purchases nationally.
• Centrix credit data shows that while overall mortgage arrears dropped to 1.49% of the credit active population, formal financial hardship cases rose by 13.3% year-on-year.
• Regional property trends: Wellington's asking prices jumped 12.9% due to a 32.1% drop in new listings, while Southland hits record asking price highs.
• Chief Economist Shamubeel Eaqub's new modelling highlights how a flat 15% tax on KiwiSaver contributions and returns could leave the average retiree $60,000 better off.

About Property Apprentice: We are a 100% independent property education and coaching company in New Zealand. We do not sell property, which means we have zero conflicts of interest. Our only goal is to help everyday Kiwis, first-home buyers, and experienced investors make smart, data-backed decisions.

Transcript

[00:00:07] Debbie Roberts: Hi, everyone. I'm Debbie Roberts, owner and financial adviser at Property Apprentice. Join us today for the Week in Review, where I talk about current events for the everyday investor and homebuyer.

[00:00:26] Debbie Roberts: So first up for this week in review from GoodReturns on the 3rd of June, first-home buyers are getting more bang for their buck. And as always, the links to all of these articles are in our notes below.

With an oversupply of homes for sale and buyers holding most of the bargaining power, first-home buyers are taking advantage of the current housing environment. Many are managing to secure larger homes without paying significantly more. According to the inaugural Cotality Westpac New Zealand First Home Buyer Report, 75% of first-home buyer purchases this year have been standalone houses. That's the highest share since 2020.

Despite this, the median price paid by first-home buyers has remained stable at $700,000. That's lower than the 2022 figure of $719,000. Between January and April 2025, first-home buyers accounted for nearly 25% of all property purchases in New Zealand. That's a notable increase from the long-term average of 21 to 22%.

While their median purchase price remains below the overall buyer median of $780,000, it's still well above the lower quartile price of $585,000. This trend is especially noticeable in major urban centers like Auckland, Wellington, and Hamilton, where first-home buyers tend to aim for mid-range properties rather than the cheapest on the market.

Standalone homes remain the top choice in most regions. In Dunedin, 90% of first-home buyers purchased standalone houses, followed closely by Hamilton and Tauranga at 89%. In contrast, Auckland at 64%, Wellington at 67%, and Christchurch at 66% show slightly lower shares of standalone home purchases due to the higher presence and affordability of townhouses and apartments.

Regionally, Auckland saw the highest median price for first-home buyers at $903,000, still below the citywide median, but significantly above the lower quartile. Other median first-home buyer prices include $767,000 in Tauranga, $740,000 in Wellington, and $705,000 in Hamilton. Queenstown reported the highest median price nationwide at $1,107,500, while Invercargill had the lowest at $430,000. These figures suggest that first-home buyers are targeting value without compromising too much on location or home quality.

Declining interest rates have also played a crucial role in improving affordability. In Auckland, mortgage interest can consume about 40% of a household's income compared to the national average of 33%. In regions like Taranaki and Whanganui, this drops to between 20% and 25%.

The average age of first-home buyers is also trending upwards. Buyers in Auckland now average 37 years old, with Wellington at 36 and Christchurch at 35, around two to three years older than in 2019. This shift is attributed to lifestyle choices such as travel, career building, and starting families. Many first-home buyers now have children at the time of purchase, influencing their choice of home type, size, and location, as well as the duration of their mortgage repayment plans.

I would personally suggest that if you are able to purchase a home before you get pregnant, your borrowing capacity is gonna be a bit stronger with two incomes and no dependents. So it's worth thinking about getting your foot on the ladder before you start having babies, if possible.

Although first-home buyers remain prominent, there's growing interest from other owner-occupiers and investors. However, investors are not as active as they were before the pandemic, likely due to slow rental growth and modest capital gains. Among urban areas, Wellington leads in the first-home buyer market activity, where they make up 36% of buyers. That's 7% above average.

Access to deposits has been made easier for first-home buyers through KiwiSaver withdrawals, which have been increasing since 2023 alongside growing account balances. Many are also benefiting from low-deposit lending under banks' loan-to-value ratio exemptions, the LVR exemptions, which allow up to 20% of lending to go to borrowers with deposits less than 20%. That means one in five loans per bank per month can go to people who've got less than 20% deposit. First-home buyers have taken full advantage of this, maximizing their borrowing potential.

Looking ahead, first-home buyer activity is expected to rise. Economists Kelvin Davidson and Satish Ranchhod predict sales volumes will grow from 82,000 in 2024 to around 92,000 in 2025, with national house prices rising by about 5%. The current slow market gives first-home buyers more time to negotiate better deals or purchase larger homes for the same price.

However, buyers should be aware that while rents remain flat, allowing more time to save, house prices are starting to creep upward, wage growth is cooling, and further interest rate drops are unlikely. Ranchhod advises potential buyers to consider their long-term strategy and consult with their mortgage professionals, mortgage advisers, in other words.

[00:06:06] Debbie Roberts: Second topic for this week in review from Good Returns on the 4th of June, mortgage arrears are falling, but hardships are up.

The number of New Zealand homeowners falling behind on their mortgage repayments is starting to decline. As of April, approximately 22,000 borrowers were in arrears. That's a reduction of 1,400 from March, according to the latest data from Centrix. This brings the arrears rate down to 1.49% of the credit active population compared to 1.5% the previous month. Despite this improvement, arrears remain slightly higher than the same time last year when they stood at 1.45%.

The decline may signal the start of a positive trend. In February, mortgage delinquencies had peaked at an eight-year high with 23,700 past due loans. That's a 6% year-on-year increase. However, seasonally adjusted figures have since shown signs of stabilization, helped in part by falling interest rates. As more homeowners exit fixed mortgage terms, many are able to lock in lower rates, freeing up income and improving household finances. Mortgage arrears also tend to ease following the high spending periods around summer and Easter.

Although mortgage arrears are falling, financial hardship applications are increasing. In April, the number of reported hardship cases rose by 300 to 14,700. That's up 13.3% compared to the same time last year. While the growth rate is slowing, the figures still highlight ongoing stress for many households. Nearly half, 46% of hardship cases relate to mortgage payment difficulties, followed by 29% involving credit card debt and 18% concerning personal loans.

Middle-aged individuals, particularly those aged 35 to 49, are experiencing the highest rates of financial strain. Many in this age group are balancing mortgage repayments, raising children, and trying to maintain their lifestyle, which can create significant financial pressure.

Consumer debt arrears fell for the fourth straight month in April, with 12.43% of the credit active population, that's around 483,000 people behind on repayments. Centrix considers this a potential trend that could benefit small and medium-sized businesses.

However, not all the news is positive. The number of consumers with debts overdue by 90 days or more rose to 83,000. That's the highest since July last year. Meanwhile, consumer confidence has also declined. The ANZ Roy Morgan survey reported a five-point drop in May, with the index falling to 92.9. Fewer people feel positive about their current financial situation, and optimism about the year ahead has also waned. The number of respondents expecting their finances to improve in a year dropped by 11 points.

House price inflation expectations, however, inched upward, now averaging 3.6% annually, with Auckland expectations at 4.1%. Yet economists note that in a sluggish economy, rising inflation expectations are unlikely to lift wages or make it easier for businesses to raise prices.

Over the past year, 730 construction companies have gone into liquidation. That's a 48% rise compared to the year before. This sector now represents nearly one-third of all business liquidations, with signs the downturn is not yet over. The construction sector faces unique challenges beyond the broader economic slowdown. While standalone house consents have seen a modest increase, consents for attached dwellings have dropped by 17%. Overall, the inflation-adjusted value of residential building consents has declined 13% compared to 2023.

New construction businesses continue to open at a rapid pace, with 81,891 registered in 2024. That's the highest number ever and growing faster than any other sector over the past decade. However, this rapid expansion has been accompanied by a 37% rise in liquidations, which now account for nearly a third of all business closures.

All of this tells me that there's plenty of opportunity out there if you're in a position where you're not concerned about losing your job and you're able to get lending. There are good opportunities to be a buyer in the current market with less competition from other buyers and no signs of an imminent influx of other purchasers. So the time is now to get yourself a good deal before the market starts to really pick up.

If you'd like to learn more about how to invest in property, and especially when it comes to countercyclical investing, join me at one of our free events called How to Succeed with Property Investing. I'll discuss strategies for successful investing from my perspective as an experienced investor and financial adviser, and all of our free events are available live and online. Check out www.propertyapprentice.co.nz for upcoming dates and register today. We don't sell property, so it's all about increasing your knowledge to reduce your risk.

If you've already been to one of our free events and you'd like to find out more about how we can help you to reach your financial goals, you can also book a no-obligation phone call or meeting with my husband, Paul Roberts, via the website, and that's www.propertyapprentice.co.nz.

[00:11:49] Debbie Roberts: Third topic for this week in review from 1News on the 3rd of June: the city showing signs of life in a quiet property market.

Wellington has emerged as a key indicator of renewed momentum in the New Zealand property market, recording a sharp 12.9% year-on-year rise in average asking prices. That's the second-largest increase nationwide. This amounts to an average increase of nearly $95,000 compared to May 2024.

According to realestate.co.nz, average asking prices rose in six of the country's nineteen regions. Wellington's surge comes despite a 32.1% drop in new listings, indicating that limited supply may be driving prices upward. Realestate.co.nz CEO Sarah Wood noted that Wellington's performance could signal returning buyer confidence after a period of subdued activity. She suggested that this jump gives sellers reasons to feel optimistic, although broader market changes are still needed to significantly shift overall conditions.

Wood also stated that while the recent official cash rate cut was not enough on its own to transform the market, further interest rate reductions and increased investor activity could drive demand higher. Nationally, the average asking price rose just 0.8% compared to the previous year.

Several other regions also saw notable increases. Taranaki was up 13.1% to $756,271. Otago was up 7.4% to $645,788. And Southland reached a record high of $564,291. However, nine regions saw annual declines. The largest drops were recorded on the West Coast, down 9.8% to $494,855.

Wood commented that the market remains largely stable after more than two years of subdued price movements. She said that any meaningful shift is likely to depend on rising demand or clearer economic signals. Looking ahead, she pointed to the combination of the OCR cut, that's the official cash rate, the traditionally slower winter season, and the upcoming Healthy Homes compliance deadline as factors that could shape market dynamics in the coming months.

And just in case you've been hiding under a rock, the Healthy Homes compliance deadline is the 1st of July. So if you haven't got your rental properties up to scratch yet, you need to get that sorted ASAP. Otherwise, be prepared to face some financial penalties.

Wellington's current movement, Wood added, is worth watching as major urban markets often lead national trends. My thoughts on this are that averages can get skewed quite easily by outliers, so we tend to look more at the house price index from the Real Estate Institute of New Zealand and also the median house prices, which are a little bit less affected by the occasional outlier.

[00:15:03] Debbie Roberts: Fourth topic for this week in review from RNZ on the 5th of June, regional property prices set to grow faster than the main centers.

Property prices across New Zealand are showing early signs that regional areas may begin outperforming the main urban centers. According to the latest data from Cotality, formerly CoreLogic, national property values dipped by 0.1% in May, making them 1.6% lower than the same time last year.

While Hamilton saw a slight 0.1% increase in May, Dunedin and Tauranga recorded minor declines of 0.1%. Auckland prices fell 0.3%, Wellington 0.4%, and Christchurch led the drop with a 0.8% decrease. In contrast, Invercargill rose 0.5%, Queenstown climbed 1.2%, and Rotorua, New Plymouth, and Hastings also posted gains.

Kelvin Davidson, chief property economist at Cotality, noted a growing divergence between the regions and the main centers. He described the trend as modest but indicative of current market dynamics. Davidson said that while national factors such as lower mortgage rates and the sluggish economy affect all areas, some regional economies, especially those linked to agriculture, are performing relatively well. He pointed to Fonterra's forecast of a $10 payout per kilogram of milk solids as a potential driver of local housing confidence.

In contrast, centers like Wellington continue to feel the effects of public sector job cuts, and Davidson believes a broader economic recovery will be needed before property prices rebound there. He cautioned that any housing market recovery is likely to be slow and uneven.

Although declining mortgage rates are boosting confidence and enabling more borrowing, as reflected in the Reserve Bank data, housing remains expensive and a soft labor market is dampening demand. Filled job numbers dropped again in April. While sales volumes may gradually reduce the surplus of listings, the current oversupply means buyers will likely retain negotiating power for much of the year, keeping prices in check. He acknowledged that his earlier forecast of a 5% annual increase in values may now be overly optimistic, though there's still time for the market to shift.

Davidson believes the current balanced market offers opportunities for a variety of buyers, including first-home buyers and investors, without the risk of runaway prices. So as you can see, this article kind of contradicts the previous one, and this is where it depends on how you're looking at the statistics.

[00:17:46] Debbie Roberts: Fifth topic for this week in review from 1News on the 5th of June, call to rethink tax on KiwiSaver.

KiwiSaver members in New Zealand could be significantly better off if the country adopted a tax model similar to Australia's, according to economist Shamubeel Eaqub. Eaqub, chief economist at Simplicity, ran numbers modeling a system like Australia's, where both contributions and returns are taxed at a flat rate of 15%.

Currently in New Zealand, full tax is paid on income contributed to KiwiSaver and returns in PIE funds or PIE schemes, that's portfolio investment entity. Those are taxed at an investor's prescribed investor rate, which can be as high as 28%. Eaqub said that an average KiwiSaver investor starting now could end up with $60,000 better off in nominal terms at retirement under a model similar to Australia's.

If no tax was paid on contributions or returns, the gain could be about one million dollars. If only taxes on returns were removed, the improvement could be around $300,000. Eaqub noted that while there's an ongoing discussion in Australia about whether tax breaks might be too generous for wealthier people, the system heavily incentivizes saving in private pensions, unlike New Zealand.

Kirk Hope, Chief Executive of the Financial Services Council, which represents KiwiSaver providers, explained that the Australian model differs because Australia has a means-tested pension. In New Zealand, tax breaks typically occur at retirement through National Superannuation, which is roughly equivalent to $500,000 in value. Hope said it's difficult to make a direct comparison between the two countries' systems due to their differing objectives.

Hope added that reducing taxes on savings in New Zealand could provide future governments with more fiscal flexibility regarding superannuation policies. He recalled that New Zealand previously operated an EET tax system. It's exempt contributions, exempt returns within the scheme, and taxed withdrawals.

According to Hope, the Tax Working Group in 2018 acknowledged that moving away from EET might have encouraged more investment in assets like housing. Reverting to an EET system would involve significant costs. The Tax Working Group estimated that transitioning to a system where returns and withdrawals are untaxed could cost $200 million to $300 million per year, while a full return to EET might cost about $2.5 billion annually. However, these costs would balance out over the long term on a net present value basis.

Hope suggested that various forms of tax incentives would be beneficial for savers, highlighting that removing or reducing the employer contribution tax would be especially helpful for low-income earners.

Dean Anderson, founder of Kernel Wealth, pointed out that New Zealand currently operates a TTE model: tax contributions, tax returns, and exempt withdrawals. He believes an EET model where tax is only paid on withdrawals would significantly improve future savings. Anderson emphasized that the government should explore all possible measures to increase savings rates, benefiting both Kiwis and the country in the long run.

Anna-Marie Lockyer, chief executive at Pie Funds, explained that KiwiSaver members are disadvantaged compared to Australians because New Zealand lacks upfront tax incentives to encourage greater contributions. She suggested that introducing a mid-tier flat tax rate on savings up to a certain amount could encourage more saving. Lockyer also highlighted that employer contributions are taxed in New Zealand, which diminishes the effects of compounding.

Additionally, investors pay tax on bonds and deemed dividends on global equities, effectively functioning as a capital gains tax. She concluded that these factors work against the government's goal of helping New Zealanders grow their KiwiSaver balances, resulting in lower retirement savings compared to Australians.

My understanding is that Australians also have a much higher minimum contribution to the Australian super compared to New Zealand, with our current minimum at 3%, moving towards a 4% contribution.

[00:22:16] Debbie Roberts: With property prices shifting and KiwiSaver changes on the horizon, staying informed has never been more important. Join us at one of our free events called How to Succeed with Property Investing, and these events are all available online so you can gain valuable insights and strategies tailored to today's current market conditions. Whether you're an experienced investor or just getting started, this free session will equip you with the key tools and insights to make confident, informed decisions.

Don't miss out. Register today and take the next step towards achieving your financial success. In our free events, I'll also tell you more about how we help our clients to achieve their investing goals. So if you're interested in finding out more about what we do, visit propertyapprentice.co.nz today and register for one of our free events.

If you've already been to one and you'd like to know more about how we can help you on your journey, book a no-obligation phone call or meeting with my husband, Paul Roberts, via our website. That's propertyapprentice.co.nz.

Thanks for listening.