After suddenly retreating from the housing market in the face of rising interest rates and tight credit availability, "the extent to which first home buyers are withdrawing has eased somewhat", a new survey of mortgage advisors suggests.
The Government amended the Credit Contract and Consumer Finance Act (CCCFA) in December last year in a bid to protect Kiwis from irresponsible lending.
It required lenders to give greater scrutiny to borrowers' finances to ensure they can repay loans, but led to complaints home loans were being rejected due to customers spending too much on the likes of Christmas shopping, takeaways, and streaming services.
That, along with mounting interest rates in the latter months of 2021, led first home buyers to take a step back from the property market.
However, a new report from economist Tony Alexander and mortgages.co.nz has found that while first home buyers continue to be cautious, "the extent to which first home buyers are withdrawing has eased somewhat".
The results come from a monthly survey by Alexander of mortgage advisers across New Zealand. It found a net 20 percent of the 75 respondents reported they are seeing fewer first home buyers in the market. That's compared to 65 percent in February.
"This is a sharp improvement from levels of the past three months and although still negative does bespeak of the stepping back in response to tight credit and rising interest rates perhaps having past its peak," the report says.
Since concerns were raised with the possible unintended consequences of the CCCFA changes, the Government has announced several tweaks, including not requiring regular savings or investments to be inquired into when lenders assess borrowers' expenses.
But the changes won't take effect until early June after stakeholders have been consulted.
Alexander's report says some advisers were frustrated by this and won't be changing the way they assess borrowers' expenses until June as a result.
"Lenders are perceived to be still becoming less willing to lend. But the extent to which they are easing off credit availability has eased a lot," the report says.
"The credit crunch may have past its peak, although some banks are tightening rules for assessing investors’ expenses, and some are going to wait until June before altering their rules related to the Credit Contracts and Consumer Finance Act."
In December, it was reported that a net 93 percent of advisers said banks were less willing to lend. That eased to 83 percent in January, 61 percent in February, and just 12 percent in March.
The report says younger buyers "are facing a barrage of factors to try and take into account".
"How far will prices fall? How high will interest rates go? What will be the impact of the soaring cost of living? How many more listings will appear? Are banks really going to start lending again?"
The concept of FOOP (fear of over-paying) was raised by the Real Estate Institute of New Zealand earlier this month when it revealed that while the median national property price had increased during February, it had only done so by a "moderate" 0.6 percent.
"While prices remain strong - increasing annually in all regions - the number of sales continue to trend downwards and an influx of stock across New Zealand is easing demand side pressure, which may in turn further ease price growth in the coming months," REINZ chief executive Jen Baird said at the time.
Alexander reports there's also been a change in how many mortgage advisers are seeing investors in the market.
"A net 51 percent of advisers say that they are seeing fewer investors seeking their assistance. This is the least weak result since November," the report says.
"But the improvement from -61 percent last month is far smaller than the change for first home buyers and tells us that the stepping back of investors since the March 23 tax announcement of last year remains firmly in place."
The Government announced a package of measures last March in an attempt to move the market towards first home buyers and away from property investors. That includes removing interest deductibility and extending the bright-line test.
According to REINZ, the median national price for a residential property in New Zealand in February was $885,000, up from $780,000 in February 2021. Prices peaks in November at $925,000 before dipping in December and January and then slightly increasing in February.
The December changes to the CCCFA resulted in about 7 percent of ASB's customers missing out on loans in February, the bank said. CoreLogic said there was a "significant drop in mortgage activity".
