The buying rush begins! Are more first-home buyers returning to the market to secure a deal before their bank pre-approval expires?

Real estate agents have recently noticed a surge in first-home buyers searching South Auckland for their ideal home. Many prospective buyers are even trying to ‘beat’ their competitors by making offers before auction to win the buyer over.

A four-bedroom, two-bathroom home at 38 Twin Parks Rise, Papakura, attracted offers from five first-home buyers before auction

Alex Dunn, an agent with Harcourt Papakura, said the four-bedroom Papakura home had received five seemingly ‘crazy’ offers before auction. In fact, four offers arrived on the first weekend, all from first-home buyers. The property had a 2021 valuation of NZ$1,150,000, while OneRoof valued it at NZ$1,070,000. Dunn noticed some ‘very motivated’ first-home buyers competing to raise their offers, and this was not the only property where he had recently seen such a buying rush.

He believes this wave of first-home buying is driven by buyers hoping to secure a home before their bank pre-approval expires. Dunn stressed that fear of paying too much had been replaced by fear of missing out (FOMO), especially now that prices were widely believed to have reached their lowest possible level. With their 3-month pre-approval period also nearing its end, buyers worry that rising mortgage interest rates will reduce their borrowing capacity if they have to apply again.

Jatinder Singh, a mortgage adviser at Kiwi Mortgages, said many first-home buyers had found they could borrow more following the easing of Credit Contracts and Consumer Finance Act (CCCFA) rules in early June, and did not want to miss their opportunity to obtain those loans.

Following the easing of the rules, banks reportedly no longer considered discretionary spending such as Netflix and Uber Eats when assessing mortgage applications. Meanwhile, a major bank voluntarily lowered its mortgage test rate, allowing around 75% of Singh’s clients to borrow 5%–10% more than before. Singh said one client’s maximum mortgage pre-approval had risen overnight from NZ$800,000 to NZ$900,000. Many of his clients had long wanted to buy but had been unable to purchase properties in their preferred price range because their pre-approved borrowing limits were too low. Now their limits had increased, creating a rare opportunity. Worried that banks might change their policies again and reduce those limits, they felt it was better to act now.

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Meanwhile, many first-home buyers are also using the government’s previously introduced First Home Loan and grant scheme to realise their homeownership dreams sooner. Under the scheme, Kāinga Ora provides a guarantee for borrowers, who need a deposit of only 5% rather than the usual 20%. Many believe interest rates will not remain high for very long, while current house prices are already at historic lows, making now the best time to buy. Even if they have to pay higher interest over the next few years, they believe they will be better off when rates fall, because house prices will also have risen considerably by then.

Gareth Veale, a financial adviser at EasyStreet Mortgages, says buying a home is becoming easier for first-home buyers

Harsh Kathuria, a salesperson at Harcourts Papatoetoe, said most of the properties he was currently selling were going to first-home buyers. He said many were expressing, directly or indirectly, the view that ‘house prices have reached their floor and will not fall any further’. One first-home buyer told him that higher interest rates of around 7% would not put him off, because he had never experienced rates of 2% or 3%. He did not mind how high rates were; he simply wanted to buy a home.

Similarly, Tom McCartney, a salesperson at Ray White Manurewa, has also noticed large numbers of first-home buyers in the market. He recently sold a renovated home on Waimate Street in Otara to a first-home-buying couple for NZ$800,000. He suspects first-home buyers are beginning to recognise that inflation is falling. If that trend continues, interest rates will also fall, and they may well miss the bottom of the housing market.

Gareth Veale, an adviser at EasyStreet Mortgages, said obtaining a loan had become easier for first-home buyers over the past month. He believed it was a good time to buy, particularly as buyers worried that conditions could change once their three-month pre-approval period ended. In terms of purchase costs, the market was at a low point, with those costs increasing as interest rates rose. In terms of housing market activity, it was a high point for the first-home buyer market, as people were willing to pay more for homes and competition among buyers had intensified.