First-home buyer enquiries jumped in August, marking the first positive month since the March 23 housing announcement, a latest survey shows.
In contrast, investors backed away, as more mortgage advisors reported seeing few investors compared to the previous month.
An August survey of 65 nationwide mortgage advisors by Tony Alexander and mortgages.co.nz shows before the COVID-19 lockdown, fewer first-home buyers were stepping back from the property market compared to previous months.
A net 3 percent of advisors reported seeing more first home-buyers in August - up from a net 10 percent seeing fewer first-home buyers in July.
After four months of negative results, independent economist Tony Alexander said this was a positive sign for first-home buyer activity. He puts that down to a gradual adjustment of thinking after the Government housing announcement on March 23.
By August, the results showed first-home buyers had "lost a lot of their worry", REINZ data showing property prices continued to rise.
"They saw the investors getting quite agitated and stepped back from the market at exactly the time they should step forward," Alexander said.
"Basically it's taken them four-to-five months to come back out of their shell," Alexander said.
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A net 48 percent of mortgage advisors saw fewer investors. The result follows a net 19 percent seeing fewer investors in July, the level of enquiry retracting to a similar level to June.
"They're still backing away...I think it's still mainly the March 23 tax announcement, the loss of the interest deductibility [phased out over four years from October 1 for properties bought before March 27]," Alexander said.
The drop in investor enquiry was likely to be compounded by expectations of interest rate rises, proposed tightening of lending rules and the possibility of further regulation, he added.
Borrowers showed a strong preference for three-year fixed mortgage rates. This was a trend over the previous three months, as borrowers looked to "take some risk off the table" amid forecasts of interest rate rises.
"The three-year term is the most popular, 25 percent of advisors saying there was still interest in fixing for two years...interest in [fixing for] one-year is basically gone," Alexander said.
Although first-home buyer activity did bounce back, Alexander noted they faced challenges around getting property valuations and LIM reports and expectations of interest rate rises. ASB's weekly economic report on August 23 forecasts three Official Cash Rate rises in October, November and February, to 1 percent.
Perceptions of banks' willingness to lend have been dropping since June. In July, a net 13 percent of advisers felt banks were more willing to lend. In August, perceptions fell to a net 11 percent, the report said.
COVID-19 level 4 lockdown rules prevent buyers from viewing properties at open homes and private viewings. Once the current lockdown ends, Alexander doesn't expect prices to rise at the same pace as last year, REINZ June 2020 figures showing a 9.2 percent rise year-on-year.
"We don't have a fresh cutting of interest rates and we don't have the removal of loan-to-value ratio restrictions (LVRs) - those are two elements that really got the momentum going last time around," Alexander said.
The Tony Alexander mortgage advisors collated 65 responses from mortgage advisers across the country and is an early indication of market activity.
The full August mortgage advisor survey can be read here.
