The dreams of a generation of young Kiwis of owning their own homes are being dashed by Reserve Bank measures meaning they will have to stump up huge deposits.
Almost 80 per cent of people looking to buy their first homes say they cannot afford the 20 per cent deposit or will need family help, according to the latest Fairfax Media-Ipsos political poll.
The poll also shows the public is overwhelmingly looking to the Government to help make homes more affordable, with 85.6 per cent seeing government action as important. Respondents favour direct intervention including low-deposit government loans, and building state homes for first home buyers and releasing more land for development.
But some help is on the way with the Government revealing details of proposed new developments in Auckland which would see thousands of new homes built, with requirements in some projects for 25 per cent of homes built to be affordable, once new legislation to speed up home construction is passed.
Housing affordability has become a hot political issue as more Kiwis worry they will be lifelong renters, with the major parties jockeying for popular support and floating a range of proposals.
National has announced measures including releasing more land for development and increasing the availability of government subsidies to try to curb price increases and ensure first-home buyers are not locked out of the market.
Labour and the Greens say they would restrict foreign speculators, increase supply and introduce a capital gains tax which would exclude the family home.
First-home buyers took another hit last week, however, when the Reserve Bank confirmed its long-anticipated loan to value ratio (LVR) restrictions on lending to people with less than a 20 per cent deposit in order to try to cool the market, and interest rates are also expected to rise from next year.
The changes mean more Kiwis are worried they will either be priced out of the market or have to turn to their families for support.
The poll asked those who were planning on buying a house within the next five years - 17.6 per cent of respondents - whether they could come up with the $88,000 to buy a home worth the national average of about $440,000.
Almost half said there was no way they could afford that, and just over 31 per cent said they could do so only with help from their parents.
Just over a fifth said they could do so on their own, and just under 14 per cent of that number were aged under 30.
To make matters worse for those prospective buyers, fewer than 30 per cent of all respondents thought the loan restrictions were the most effective tool to combat rising house prices.
Housing Minister Dr Nick Smith said he was not surprised by the results but said this generation was not unique, with home ownership declining for the past 25 years.
"It has always been a big stretch for every generation of New Zealanders to get on to that first rung of the property market."
KiwiSaver subsidies, the Welcome Home Loan scheme and approval for 10 per cent of bank loans to go to people without the 20 per cent deposit would still see thousands of New Zealanders helped into first homes, he said.
Based on average incomes and house prices, it would take couples six years in KiwiSaver to save the required deposit. Interest in the Welcome Home Loan Scheme, which allows people to borrow more in higher-priced areas and is exempt from the Reserve Bank restrictions, had soared since the extension was announced earlier this month, he said. The changes take effect from October 1.
Smith said the Government faced significant challenges and was considering a number of other tools but the Housing Accords and Special Housing Areas Bill, which would release more land for development and should pass in the next few weeks, were showing positive early signs.
One development, at the old Hobsonville Air Force base, would see the Government supply the land and the developers build 1000 homes, and a minimum 25 per cent of those to be worth less than $485,000. That deal was being worked through by Auckland Council and could get the go-ahead as soon as the legislation was passed, he said.
The Government had spoken to more than 20 other developers and, although not all projects would have to include affordable housing, there was space in the legislation for it to be required where appropriate.
With such developments, it would not take many developers to build the required 13,000 homes a year to make a difference in Auckland, he said.
"That's what gives me the optimism that we can get some real momentum around the house build part of the supply problem."
But an increase in interest rates would have as big an effect on keeping people out of homes as the LVR restrictions.
Labour's Phil Twyford said the number of people who saw 20 per cent as unaffordable was "staggeringly high" and there was "huge pressure" on first home buyers.
"People are feeling very pessimistic about getting into their first home."
The LVR restrictions would put more pressure on parents and drive low-income earners into the arms of loan sharks, he said.
The central problem was the lack of supply and National's approach of tinkering with regulations was not enough, since only around 5 per cent of homes currently being built were considered affordable relative to incomes, he said.
Labour would focus on building 100,000 affordable starter homes over the next 10 years.
In terms of tools which respondents thought would be most effective to make houses more affordable, the poll showed the most favoured was low-deposit government loans to first-home buyers, followed by the Government building more affordable houses for on-selling and releasing more land for building.
Just over 37 per cent supported a capital gains tax, though opinion was split almost down the middle on Labour's proposed ban on foreign buyers.
The poll surveyed 1011 people between August 10 and August 15 and has a margin of error of 3.1 per cent.
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HOUSE RULES: THREE STORIES
Rangiwhetu Robinson has been through all the 21sts and weddings and births of his friends' children and is now at the time in his life when everyone is starting to buy houses.
The 31-year-old Taranaki meatworker hopes to buy one for his partner and three young children in two years but with his wife off work and a household income of around $56,000, he says that is not easy, even with modest ambitions to purchase something worth about $220,000.
At this stage he is relying on his KiwiSaver for the deposit, even though he has been in the scheme for only 18 months and will have to wait till his fourth year to access it. "Hopefully by the fourth year it should be up there."
He was trying to save elsewhere "but it don't really work out".
Robinson, who is renting his cousin's house, says New Zealand is getting increasingly expensive and he has watched his parents, brothers and cousins all leave for the higher pay packets and promises of a better life in Australia.
He, too, is considering moving there. "Our wage hasn't gone up and that's probably the only thing that hasn't gone up."
He supports restrictions on foreign buyers but disagrees with the LVR restrictions, saying 20 per cent was too much. The Government should be concentrating on increasing housing density rather than urban sprawl.
Sourabh Sahni came to New Zealand from India more than a year ago so he could complete his MBA.
The 27-year-old and his wife, Ritu Arora, are renting in New Lynn and planned to buy in two years. They want to make a life here but houses and the cost of living are so expensive they might not be able to settle here in the long term, he says.
"We can't think about buying alone for the next four or five years [now] . . . $80,000, $90,000 just for a deposit is a lot because other things are also very expensive here."
They earn around $70,000 a year and before the changes had hoped to save $40,000 for a deposit on a $400,000 home. However, they realised this would not go far in Auckland where the average price is about $633,000.
If there were job options elsewhere in New Zealand or overseas they would consider that "because we are here to get a good home".
High house prices would scare off potential immigrants and all Kiwis should be able to own their own home.
They could not afford to continue KiwiSaver contributions so will not get the subsidy.
New Zealand should have restrictions on foreigners as well as capital gains taxes, like India, to make it easier for first-home buyers and not require such large deposits from them.
Auckland woman Lavinia Andrew, 27, has put a lot of thought into buying a home for herself and 7-year-old son James.
The fulltime student graduates at the end of next year and planned to save $50,000 over 2 years to buy a home in Palmerston North where she could buy a three-bedroom house for about $450,000.
She has moved home with her mum in order to save more money. Frustratingly, the Reserve Bank's new moves have set those plans back another 2 years.
She said she would now have to sit down "and recalculate and make a whole new grand plan".
"You've got this goal and you can almost see the light at the end of the tunne,l then that turns out to be a freight train."
House prices and the new restrictions were seeing home ownership "becoming an unrealistic dream". She is not in KiwiSaver and said she had planned to buy something with her mum but decided to do it on her own.
She supported releasing more land to build more houses and thought people also needed to take personal responsibility.
"We were brought up on the philosophy of if you want something bad enough you earn it, you do whatever you have to to save the money to get there. You don't go sticking your hand out."
- © Fairfax NZ News
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