Revealed: Where Kiwis are staying in their first home for longer
It’s been a while since anyone brought up the quarter acre Kiwi pavlova paradise dream, when “everyone” owned their own big slice of dirt.
Like many myths of the good old days of the 1960s and 70s, that’s not quite true. Home-ownership didn’t peak until 1991, at just under 74 percent - recent enough to make us think that was the “normal”. In 1951, it was just over 61 percent, and when that 60-year low was recently matched in the 2013 census (at just under 64 percent), folks were rightly alarmed.
What is alarming was the slipping ownership rates among younger people: for all under-40s, ownership rates had slid from 35 percent in 2001 to 22 percent in 2013. In 2001, more than a quarter of people aged 25 to 29 already owned a house, as did 48 percent of 30-34-year-olds and 61 percent of 35-39-year-olds. By 2013, those shares were well down to a mere 18 percent, 36 percent and only 50 percent respectively.
The climb up the property ladder starts later, and lasts longer on the first rung.
OneRoof and data partner Valocity looked at where first-home buyers start on the ladder, what sort of places they buy and how soon before they move on, based on mortgage registration data over the last five years from the start of 2014 to the end of 2018. To get a true picture of moving from home to home, we investigated only registrations which involved market transactions (ignoring refinancing / other non-transactional registrations).
First-home buyers on average own their first home for just over five years, before moving on, and mostly this is to another home, rather than to owning second homes or investing. Auckland first-home buyers move slightly faster - in 4.7 years - while Christchurch buyers are in their first home for just over six years. But averages disguise the fact that nearly six in ten (56 percent) of buyers have stayed in that first home for more than seven years. This is a slower move-around time than the next steps on the property ladder, where three in ten people stay three to five years and another quarter five to seven years.
Price is no doubt the driver in staying put. While nine out of ten Dunedin first-home buyers are lucky enough to find a single family home under $300,000 or $400,000, in Auckland only a tiny one percent find houses at that price on the ladder. And only another 9 percent managed to start under $600,000. Instead, an astounding 31 percent of first home buyers start at prices over $1.1 million, 41 percent between $600,000 and $900,000 when they are buying the single family home.
It is only those buying apartments who can start on the Auckland ladder at under $450,000 (25 percent) or up to $600,000 (29 percent). What they get is tiny: 71 percent are less than 80sqm. Flat-buyers in Auckland spend a bit more - six in ten spend $450,000 to $750,000 - while the rest of the country’s first-home flat-buyers are spending under $600,000. In Christchurch, it’s under $450,000 and lucky Dunedin-ites more than 80 percent spend less than $300,000 on their first flat.
The admonition to start small has reached most new buyers: only a fraction go really tiny – homes of less than 80sqm - but the majority are honing in on places under 140sqm. It does vary by region. Aucklanders are thinking bigger than the rest of the country (23 percent of first-home buyers are buying more than 200sqm), while Christchurch and Dunedin buyers are more modest: 54 percent are buying houses between 60sqm and 140sqm in Christchurch, 59 percent in Dunedin.
The quarter acre paradise has shrunk to 300sqm to 700sqm for nearly half of all first home buyers around the country.
Once they are moving up the property ladder from the first home, homeowners do tend to move more quickly - more than half of movers have changed houses again within seven years, 28 percent within five years. Tauranga buyers tend to flip faster than the rest of the country, one in five movers heading to their next place within three years.
The rate of mortgages discharged for both first-home buyers and movers has slowed in the last three years: in Christchurch, from nearly 16 percent in 2016 to 13 percent in 2018; in Auckland, from just over 14 percent to 12 percent.
When first-home buyers and movers discharge their mortgages, they are both moving out of properties with similar sized land of between 500sqm and 700sqm - the quarter acres is long gone. There is a significant difference the size of the property size, with movers typically discharging their mortgage on bigger dwellings of 200sqm to 300sqm, compared to first-home buyers moving on from smaller places between 80sqm and 140sqm.
Valocity’s head of valuation, James Wilson, noted that total discharge percentages have declined in all main urban centres.
“That is not entirely unsurprising given the rapid house price inflation that these markets have experienced,” he says. “Put simply – with a higher entry price to market, debt levels are higher, therefore total numbers of those paying off mortgages declines.
“This also aligns with recent research on the number of mortgage free properties around the country. We found, that with historically low mortgage rates people are opting to use the equity in their house as a source of capital to purchase other property or investments.”