First home buyers are fighting it out with investors, the report says.

Property investors have become - by far - the biggest buyers in the Hamilton housing market.

And nearly one in three of those is coming from Auckland.

But emotional first-home buyers are being warned they're their own worst enemies in driving entry level prices out of reach.

Figures from property analyst Core Logic show in the past year almost half of all those buying property in Hamilton are those who already own other properties and are just adding to their collection.

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* First home Hamilton buyers struggle

* Over a quarter of Hamilton house sales to Aucklanders



First-home buyers and Auckland investors were neck and neck in buying houses in Hamilton in the third quarter of 2015.

First home buyers stood at 18.2 per cent, only just ahead of 17.4 per cent for Auckland investors. Add in the other investors on 30.5 per cent and you have a total investor market of 47.9 per cent.

Figures from the first full year of the HomeStart grant - a scheme introduced on April 1, 2015, which allows people to dip into their KiwiSaver scheme to buy their first home, shows the grant is not having the impact the government was trying to achieve.

According to Core Logic, the percentage of first-home buyers in the final quarter of 2012 was 25.4 per cent of the buyers. By the final quarter of 2015, that number had continued to drop, reaching 21.5 per cent. Even comparing 2015 first quarter to 2016 first quarter, the numbers can be described as relatively static.

In the greater Waikato region, 1045 houses were bought with the help of the HomeStart grant in the year to March 31, 2016.

But don't expect the Government to step in against our northern counterparts, Housing Minister Nick Smith said.

"The Government isn't going to make rules against Auckland investors," he said.

First-time owners need to play the long game, he added.

It was reasonable to expect it would take the average income earner on $40,000 five years to save a deposit to get into a home, Smith said.

He believes the Government is doing all it can to get people into their first home.

"The Government is screwing the scrum towards the first-home buyer."

The National Government has been extremely generous in its package, which included the HomeStart grant and the 10 per cent Welcome Home Loan deposit requirement, Smith said.

Investors are not the devil and are not responsible for the rapidly rising house prices, he said.

Instead Smith gave two reasons for the high prices - the lack of land and a simple case of catch-up.

"Hamilton is a great place to live and people are realising that. The house prices have been undervalued for so long, it's just natural correction."

But the best way to prick the high-priced housing bubble is for district councils to start rezoning land allowing development, he said.

If councils rezone a significant amount of land for subdivision, then there will be enough land on the free market for people to buy, taking away the huge amount of money that can be made from land sales.

It is the price of land that's pushing up the house prices, he said. Supply more land and you can start to combat the issue.

However, Core Logic senior research analyst Nick Goodall believes the higher prices for entry level houses - $50,000 to $100,000 above council valuation - is a result of first-home buyers, not investors.

"They are emotionally driven to buy a house to get into the property market. That type of behaviour is quite relevant at the moment," Goodall said.

Investors, by contrast, are trying to make a savvy investment.

QV statistics show the value of Hamilton houses has risen 25.3 per cent year on year.

That level of growth is not sustainable and would see the Auckland investors back off, Goodall said.

"I think the yield is starting to drop, so it makes [Hamilton investment property] less attractive. Investors are starting to look back in Auckland to make capital gains."

Goodall agrees that a bit of catch-up is also going on, saying the market is recovering from a flat time since the Global Financial Crisis.