The number of first home buyers eligible for KiwiSaver deposit subsidies will double under changes announced by Prime Minster John Key today.
Housing Minister Nick Smith said the biggest impact of the changes would be Auckland, where unrealistically low price caps were severely restricting access to their KiwiSaver deposit scheme and Welcome Home loan scheme, where the Government underwrites loans for qualifying people.
"The number of Aucklanders accessing the First home Deposit Subsidy is expected to grow from 1030 to 3000 a year and Welcome Home Loans from 52 to 867."
Click the links below to read various reports on the policy (in PDF formats).-
Mr Key confirmed plans to beef up assistance to first home buyers in his closing speech to the National Party conference today.
But it comes with a sting in the tail - buyers will have to save a bigger deposit before they qualify for Government assistance. And it will be harder for single people or groups to qualify under new income thresholds.
Key said the requirement for a bigger deposit was necessary to avoid throwing fuel on an already overheated housing market in Auckland.
Today's announcements will see the Government will put an extra $64 million into the KiwiSaver and Welcome Home loan first home buyer schemes to help more young people save a deposit.
"We will relax the restrictions around KiwiSaver members accessing the extra deposit assistance of up to $5000 that is currently available," Key said.
"We will do this by increasing the maximum joint earnings of a couple to qualify from $100,000 to $120,000.
"We will also be raising the house price cap under which the extra assistance will be available. In Auckland the cap will rise from $400,000 to $485,000. The cap will also be raised in some other parts of the country with housing affordability problems."
Restrictions for the Welcome Home Loans scheme, where the government underwrites loans for quality people, would also be relaxed to match those of KiwiSaver.
"We will also expand the scheme to treble the number of loans from about 850 loans a year to 2500 a year."
But to qualify for a First Home Buyers' subsidy from KiwiSaver or get a Welcome Home Loan buyers will need to put together a 10 per cent deposit. That could include KiwiSaver contributions.
"At the moment for example you can get a Welcome Home loan having saved a very small deposit, or no deposit, if the house is valued at $200.000.
"International experience shows it's risky to lend 100 per cent of the value of a first home. So in expanding these schemes we are assisting these people to put together a deposit, but we are also requiring them to have an initial stake in their asset as well."
Key said the package of changes would take effect from October 1.
The move comes as the Reserve Bank prepares to announce a clamp down on mortgage lending, which is widely expected to include a limit on the number of low deposit mortgages offered by banks.
The Reserve Bank is worried that soaring house prices in Auckland are unsustainable and will leave many buyers over-exposed if prices crash.
Key said the policy had been run past the Reserve Bank to ensure it did not cut across those moves.
But Labour leader David Shearer said tweaks to KiwiSaver will be "little consolation to the thousands of would-be home owners searching this weekend's property pages for an affordable home".
"Changes to Kiwisaver rules and an increase in price caps are worth supporting, but much more is needed to take the heat out of the property market.
"National needs to address the two major drivers of house prices - the shortage of affordable homes and speculators. It's time to stop dancing around the problem and offer some real solutions. First home buyers need affordable options.
Labour's KiwiBuild policy will build 100,000 affordable homes over 10 years to increase the supply of entry-level housing.
"I am also determined to reduce speculation-driven demand in our housing market. Labour will restrict sales to overseas speculators and clamp down on speculators here through a capital gains tax on houses bought over and above their own home. Green Party co-leader Russel Norman said National's plan did not address the wider affordability crisis.
"Chucking a bit of cash at first home buyers with access to fund a deposit will assist some first home buyers. But house prices will continue to rise and many more New Zealanders will be left with no means of ever affording a house.
"Moreover, John Key's changes to the Welcome Home Loan scheme will actually stop many low and middle income New Zealanders ever owning a home.
"This 'poly filler' approach from the Key Government cannot cover over the housing affordability chasm that developed under the last Government and continues to widen under this one.
"John Key wants to give the impression he is facing up to the housing affordability crisis but is not brave enough to implement measures that would actually address the fundamental drivers of the housing bubble," Dr Norman said.
"National's failure to increase the supply of affordable social housing and its failure to constrain foreign buyers of residential housing and introduce a capital gains tax on investment properties has led to a renewed housing bubble.
"The Green Party's solution to housing affordability is for a government-led programme of affordable home building and Progressive Ownership to give families a pathway to owning those homes using the government's low cost of capital.
"Assisting low and middle income New Zealanders in this way, along with a comprehensive set of regulations to tackle our current housing crisis is the way to deal with New Zealand's currently unaffordable housing market."
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