Why 2026 is a 'Goldilocks year' for first-home buyers

A notable shift is occurring in the housing market, with first-time homebuyers increasingly gaining a foothold. Recent data suggests conditions are becoming more favorable for those entering the market, driven by a combination of easing interest rates, increased housing availability, and more accessible lending practices.

First-Time Buyers Lead Market Activity

Property data from Cotality, formerly known as Corelogic, reveals that first-time homebuyers accounted for a record 28.4% of all real estate transactions in the December quarter of last year. This represents a significant portion of market activity, exceeding the 24.6% share held by mortgaged investors.

Did You Know? In November, $1.178 billion was lent to people with a deposit below 20%, with $871 million of that total going to first-time homebuyers.

Changes in Lending Practices

This increase in first-time homebuyer activity is linked to several factors, including the utilization of KiwiSaver funds for deposits and banks’ increased willingness to offer low-deposit loans. In December, the Reserve Bank adjusted its loan-to-value (LVR) restrictions, permitting banks to allocate up to 25% of new lending to owner-occupiers with deposits less than 20%.

Currently, approximately 12 to 13% of new lending is being extended to borrowers with smaller deposits. Mortgage advisors report a substantial increase in transactions involving first-time buyers, with KiwiSaver contributions typically covering 10% to 15% of the deposit.

Affordability and Market Dynamics

According to Chief Property Economist Kelvin Davidson, the cost of servicing a home loan is now comparable to, or even lower than, rental costs for some households. He attributes this to declining property values, easing mortgage rates, and the support provided by KiwiSaver and low-deposit lending options. This narrowing gap between renting and buying is making homeownership more attainable for many.

Expert Insight: The easing of LVR restrictions by the Reserve Bank has demonstrably increased the availability of funding for those with smaller deposits, directly impacting the ability of first-time buyers to enter the market. This represents a calculated risk, balancing access to homeownership with the need for responsible lending.

Glen McLeod, head of mortgage advisors Link Advisory, highlights the importance of products like the Kāinga Ora First Home Loan, which offers interest rates competitive with those for borrowers with larger deposits. Even without this product, McLeod notes that favorable outcomes are being achieved by working with multiple lenders to tailor solutions to individual buyer needs.

Looking Ahead to 2026

Campbell Hastie, of Hastie Mortgages, suggests that 2026 is shaping up to be a particularly opportune time for buyers. He cites favorable interest rates, a relatively high level of available housing stock, and increased availability of high LVR funding as key contributing factors. He also points to improved job security as a positive influence.

However, smaller investors are also re-entering the market, cautiously responding to lower mortgage rates and reduced cashflow pressures. The potential impact of debt-to-income (DTI) ratio limits in 2026 is expected to be a consideration for investors in the coming year, alongside the current weakness in rental yields.

Frequently Asked Questions

What percentage of real estate transactions were completed by first-time homebuyers in the December quarter?

First-time homebuyers were responsible for 28.4% of all real estate transactions in the December quarter of last year, a new record market share.

What change did the Reserve Bank make regarding LVR restrictions in December?

The Reserve Bank adjusted its LVR restrictions in December to allow banks to lend up to 25% of new lending to owner-occupiers with a deposit of less than 20%.

What is contributing to the increased affordability of homeownership for first-time buyers?

Declining property values, easing mortgage rates, support from KiwiSaver, and the availability of low-deposit lending options are all contributing to increased affordability.

As market conditions continue to evolve, will these trends persist, and what impact will they have on the broader housing landscape?

Why 2026 is a ‘Goldilocks year’ for first-home buyers