Real estate agents say 'FOMO' (fear of missing out) among first-home buyers is no longer a key concern, their fears having switched to inability to get finance.
It comes as Credit Contracts and Consumer Finance Act (CCCFA), introduced to protect borrowers from unaffordable debt, put greater onus on lenders to ensure loans are affordable. Mortgage brokers have reported banks are placing greater scrutiny on spending, to ensure they comply.
In a REINZ and Tony Alexander survey of 385 real estate agents nationwide, conducted late in January, a net 65 percent reported seeing fewer first-home buyers in the market.
First-home buyers are bearing the brunt of CCCFA changes, results show. A record 89 percent of real estate agents reported difficulty getting finance as buyer concern.
Almost three-quarters (69 percent) reported buyers were worried about rising interest rates affecting their capacity to borrow and service a mortgage. Concerns about falling prices ('fear of overpaying'), also went up.
Just over a quarter (26 percent) reported lack of listings as a concern.
In contrast, a net 20 percent of real estate agents reported seeing FOMO among buyers in February, a significant drop from 70 percent seeing FOMO in late October 2021.
In-line with forecasts of slowing house price growth, a net 16 percent of real estate agents reported declining prices in their area. The survey notes that responses differed according to region, a net 36 percent of agents in Canterbury reporting price rises.
Independent economist Tony Alexander told Newshub survey feedback showed many first-home buyers weren't qualifying for a mortgage. Lenders said they couldn't assume their spending habits would change once they got a mortgage.
Borrowers who didn't qualify were told to change their spending habits for three months, then reapply.
"Right now, we're in the period where the CCCFA changes are having the greatest impact, and people are having to cut back," Alexander said.
"There is a risk that some of the negativity we're seeing in the survey (and other commentary) is reflecting that this is the weakest period for first-home buyers."
A net 59 percent of real estate agents reported seeing fewer people at auctions, and a net 64 percent reported fewer attending open homes.
Real estate agents reported seeing less urgency among buyers, many of whom were unable to get finance under CCCFA rules. Some also mentioned buyers preferred to negotiate sales with property owners (vendors) directly, rather than bid at auctions.
Following the March 23 Government housing announcement, investors have continued to pull away from the market, results show. Just over half (57 percent) of real estate agents reported seeing fewer investors.
Just 5 percent of real estate agents reported seeing more investors looking to sell, down from 11 percent at the end of November.
A quarter of real estate agents reported an increase in requests for appraisals from existing homeowners, a sign of more listings coming to the market.
The reported pull-back in first-home buyer activity and reduced investor activity following the Government announcement could create an opportunity for other buyers as listings increase, Alexander said.
This includes buyers able to get finance, and existing homeowners wanting to sell.
"One reason listings have been so low is that owner-occupiers lost confidence that they could sell and then rebuy," Alexander explained.
"As they gain confidence they will sell, being confident they can buy again…range of listings again improving out there."
According to a January report by credit bureau Centrix, the portion of mortgage loan applications converted to successful loans fell almost a third (31 percent) over January. The report cites a more conversative approach to lending, as a result of debt-to-income ratios, loan-to-value ratio (LVR) restrictions and CCCFA rules.
