Sting in National's plan to help first-home buyers
More young couples are set to qualify for government help getting into their first home - but the quid pro quo is they will have to save for longer and come up with a 10 per cent deposit.
Under changes announced yesterday by National, first-home buyers will have to save for five years on average to qualify for government assistance under the KiwiSaver first-home-deposit subsidy and Welcome Home Loan mortgage insurance scheme.
The changes are firmly targeted at Auckland, where soaring house prices have put a first home out of reach for many young people, and include lifting the cap on qualifying homes, and extending the income thresholds for couples.
But the sting in the tail is that young buyers will have to save a 10 per cent deposit before they qualify for either the Welcome Home Loan scheme or the KiwiSaver first-home-deposit subsidy, which is worth $5000 after five years, or $1000 a year, to qualifying savers.
Under the former scheme, the cheapest houses can now be bought with a low or no deposit.
The changes do not affect KiwiSavers who want to take out their own and their employers' contributions to buy a first home.
The changes, announced by Prime Minister John Key, come as the property market bursts back into life, particularly in Auckland, putting pressure on interest rates and turning the matter into a political hot potato.
Housing Minister Nick Smith said the number of first-home buyers eligible for KiwiSaver deposit subsidies would double under the changes.
But the biggest impact would be in Auckland, where unrealistically low price caps were severely restricting access to the KiwiSaver deposit and Welcome Home Loan schemes.
Last year the number of Aucklanders able to qualify for Welcome Home was only about 50 - roughly the same as Southland. That was because the qualifying price cap for government assistance was too low, at $400,000. That will be lifted to $485,000 from October 1.
Dr Smith said the Reserve Bank had already confirmed it would specifically exempt people with government-guaranteed Welcome Home Loans from any limits on new mortgages. That would effectively put the 2500 people expected to qualify under the scheme at the front of the queue.
The mean sales price in Auckland is $635,000, but Dr Smith said the cap reflected the price of a modest house in a modest suburb.
"Right now on Trade Me there's over 2000 properties in that price range."
Labour leader David Shearer said tweaks to KiwiSaver would be "little consolation to the thousands of would-be homeowners 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."
Labour plans to build 100,000 affordable homes over 10 years to boost the pool of starter homes, and ban foreign speculators.
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."
For many low and middle- income New Zealanders, the prospects of owning a home had receded under the changes.
Auckland: The house price cap under KiwiSaver will rise from $400,000 to $485,000 and the same for the Welcome Home Loan scheme. The cap has also been raised by smaller amounts in Wellington City, Queenstown Lakes, Christchurch, Selwyn, Thames/Coromandel, Waimakariri, Hamilton, Western Bay of Plenty, Lower Hutt, Upper Hutt, Kapiti Coast, Tasman/ Nelson, Tauranga and Porirua City. In all other areas the cap remains at $300,000.
Couples: A $120,000 ceiling on combined income will apply under the KiwiSaver first- home-deposit scheme - compared with $100,000 at present.
Singles: Income more than $80,000 will push them above the ceiling for qualifying for a KiwiSaver first-home- deposit subsidy - compared with $100,000 at present.
Buyers who might have qualified for low or no deposit help from the Government previously: They will have to save a 10 per cent deposit to qualify for a KiwiSaver home deposit subsidy and Welcome Home Loan scheme.