First home buyers in Tauranga are having to save $33,000 more for a deposit than they did a year ago, new data shows.
The latest figures from OneRoof/Valocity show the deposit for a typical house in Tauranga is $33,000 more than it was 12 months ago. In Rotorua, it is $24,000 more.
EVE's Realty agent Mark Roy sold a Tauranga couple, who had been in the market for more than a year, their first home last week.
One of the buyers had been "in tears" at the auction of the Otumoetai property when the hammer slammed down and she realised she had finally locked down her first home, he said.
"I was stoked to be able to sell them their first home," Roy said.
One of the buyers was a builder and Roy said the property would be a "great little project" for the pair that they could easily add value too, he said.
He said getting someone on to the first "stepping stone" in the property market was a great feeling.
The property had gone for $690,000 and was in a "sought-after location" with schools and the Tauranga CBD nearby, he said.
The auction had been chock full of families and he had fielded loads of inquiries about the property prior, he said.
But OneRoof editor Owen Vaughan said first home buyers were having to scramble an extra $30,000 to buy in Tauranga compared with this time last year.
"That shows just how much the market has moved and just how punishing it is," he said.
Vaughan said an $850,000 median house price in the city meant first home buyers were looking at saving for deposits of about $100,000 - which was $67,000 more than five years ago.
The current median house price meant first home buyers were needing a 20 per cent deposit of $170,000 compared with $137,000 a year ago - a difference of $33,000.
"It's getting harder. There's not a huge amount of affordable stock in Tauranga. It's going to get steeper for first home buyers and that's a real worry because they are a huge part of the market."
In Rotorua, he said the deposits were not as high as Tauranga.
"But 12 months ago you would have typically been able to get by with a deposit of $96,000. Now it's $120,000, that's an extra $24,000. That's still a lot of money for the region," he said.
"Wages haven't climbed at the same rate. People who bought five years ago have done well."
Tremains Bay of Plenty and Waikato general manager Anton Jones said many first home buyers would use their KiwiSaver for their deposit, but regardless it would be hard to save that sort of money in a year.
"Naturally its going to go up as house prices go up. It does make it hard if you don't have the cash but you can always negotiate the deposit component on your agreement anyway.
"Naturally they have gone up because property values have gone up but it is very dependant on the equity component of the deal because if they haven't got the free cash they aren't going to be able to put the deposit into the house and will have to make alternative arrangements."
Managing director of Realty Group Ltd, which owns Bayleys and Eves, Simon Anderson, said the hardest thing for first home buyers was finding the deposit.
"But with interest rates where they are they can actually service the debt. Actually finding the deposit to put into the first property and that's where alternative methods of resourcing that deposit becomes more important."
Anderson said he liked to see a market which had steady growth, but was not unsustainable.
"That's the key to any good property market."
Anderson believed longer-term renting would be the reality in the future, as it was overseas.
"People will be in rentals, like they are around the rest of the world. A more of a global trend in New Zealand even though one of our passions is buying property."
However, higher deposit rates weren't making it easy for investors either, said Rotorua Property Investors Association president Debbie van den Broek.
"It affects everyone, and also the fact that an investor now has to have a larger percentage of the deposit (due to loan-to-value ratio (LVR) restrictions).
"Investors just can't pull money, they've got to work for it, save for it, borrow it and service the debt."
She said it would impact on the rental market, as investors wouldn't be able to provide a large supply.
"It's just going to make rental housing more expensive because there's less of it because there will be less rentals in the market going forward."
Earlier this week, CoreLogic released its House Price Index for February 2021 which suggests a housing slowdown could be on the way with Tauranga the first of the main centres to see a month-on-month drop in house prices.
There was a dip in values of 1.5 per cent in Tauranga over the month of February but across the past three months, there was still growth of 6.7 per cent.
CoreLogic head of research Nick Goodall said in other words, the flipside of rapidly rising house prices was a sharp decline in affordability, which is likely to progressively weigh on property growth rates.
Speaking of the drop, CoreLogic head of research Nick Goodall said it was evident there were weaknesses in the market over the past month.
Sales volumes had dropped considerably in January, Goodall said, although it was something to be expected over the summer period as buyers at the top end of the market were taking "longer holidays".
"That certainly seems to be the case in Tauranga where the upper end of the market above $1.1 million; we see the value taper off a little bit more than we at the lower end of the market."
Data was still being collated for February, he said.
Is it a sign of things to come?
Maybe, said Goodall, although he was adamant it was too soon to call regardless of the loan-to-value ratio (LVR) restrictions officially back in place this week
and further tightening for investors from May 1.
One Roof editor Vaughn said Tauranga's dip in sale values through February didn't mean house prices were dropping but was more indicative of the type of houses on the market which sold over that period.
The LVR restrictions requiring investors to have a 40 per cent deposit would slow the market, Vaughn believed.
"But I do not think it would drop prices to any meaningful degree that first home buyers are suddenly going to have to save less.
"The surge that lifted prices coming from the post lockdown last year, those price increases are here to stay kind. They're not going to fall back to where they were last year."
REINZ figures released this week show the median price in Tauranga is now $905,000.
Tauranga City Council strategy and growth general manager Christine Jones said the council expected an ongoing housing and business land supply shortage over the next three to five years.
"The city is planning to enable development both upwards through intensification of existing urban areas and outwards through new greenfield areas," she said.
"The city faces substantive challenges in realising large scale new greenfield developments due to infrastructure funding issues including State Highway investment."
Christine Jones
said the commission would be considering these issues in the upcoming long-term plan process.
Meanwhile, Rotorua teen Lily Anderson wants to buy a house before she turns 25 but is thinking of moving to Australia as deposit rates continue to climb further out of her reach.
The latest figures from OneRoof/Valocity show the deposit for a house in Rotorua is $24,000 more than it was 12 months ago.
"I went to a number of different banks and they all kind of told me the same thing.
"I can't afford it by myself because I cannot make the weekly payments but I just don't know how they expect a single person to buy a house by themselves."
Proceeds of the sale will be used to train seven pups as service dogs.