Government’s first home buyers package: how it could affect you

485,000 house on Open2view

New rules proposed by the Government would increase the price cap in Auckland for a KiwiSaver first home subsidy, or a Welcome Home Loan, to $485,000 – enough to help you buy this Papakura property.

We like to keep up with what politicians are promising around housing. Whether they’re in government or opposition these schemes are all worth looking at, because you never know who will be in a position to push their policies after the next election.

The National Party, like the others, is determined to be the pick of the litter come 2014. At last weekend’s conference Prime Minister John Key announced a number of tweaks to the KiwiSaver first home deposit subsidy and Welcome Home Loan. His goal: to make things easier for first home buyers.

These changes are:

  • Couples can earn up to $120,000 combined before tax to qualify – up from $100,000.
  • Singles can earn up to $80,000 before tax to qualify – down from $100,000 for KiwiSaver, $85,000 for the WHL.
  • Buyers will need to save at least ten percent before qualifying under either scheme. This is an increase if you’re applying for the KiwiSaver subsidy or borrowing less than $200,000 under the WHL. It’s a decrease from 15% for anyone borrowing more than $200,000 via the WHL.
  • The price cap for both schemes, if buying in Auckland, is rising to $485,000. The caps are also rising in Wellington and Queenstown to $425,000, $400,000 for Christchurch and Selwyn, and $350,000 for a whole lot of other areas. Go here to see the cap in your region.

National predicts all this will double the number of subsidies given out – from 5000 to 10,000 annually – and triple the number of Welcome Home Loans to 2500 a year.

We blogged last month on KiwiSaver and how to utilise it for first home buying. These changes address our concerns about the price caps being much too low, particularly in Auckland.

They are also good news for couples – a group that comprises 64% of subsidy recipients. It is, however, pretty rotten for singles earning $80-100,000. They at least remain eligible for the KiwiSaver First Home Withdrawal, which is untouched by these changes.

It’s also rough on those who don’t have the deposit, yet earn enough to service the mortgage. That’s the group targeted by the new, looming Reserve Bank rules, and they won’t find a lot to cheer about here either. John Key wants the 10% deposit in place to protect people from borrowing more than they can afford. Those who favour the Reserve Bank’s new rules for that reason will support this too.

A policy package like this, that increases demand while ignoring supply, will only push house prices up. National will be hoping their Auckland Housing Accord, alongside their also newly-announced Resource Management Act changes, will sort the supply issue out.

Reaction from others is predictably mixed. The opposition parties say the new rules will make little difference. Labour remain certain their plan to have 100,000 houses built in ten years is the circuit breaker Auckland needs.

Harcourts, meanwhile, has given qualified support. Anything that helps first home buyers is fine by them, says Chief Executive Hayden Duncan, but the issue as they (and we) see it is, first and foremost, a lack of supply:

… low housing stock must be fundamentally addressed by reducing development fees and building costs and speeding up the consents process.

“It’s simple. We don’t have enough houses, particularly in Auckland and Christchurch, to keep up with the demand. We need to make it easier for developers. The change to KiwiSaver and Welcome Home Loans criteria is good news for some, but it is not going to alter the source of the problem.”

So what do you think of the new rules? Are they going to help you or make buying harder? Share your stories in the comments or on our Facebook page.

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