The housing sector is delighted that new builds will be exempt from new lending restrictions, but says section prices in Nelson are too high.
The building industry lobbied against the Reserve Bank's new loan-to-value restrictions (LVRs), which mean most first-time home buyers require a 20 per cent deposit to qualify for a mortgage.
With many new builds being cancelled, the Registered Master Builders Federation warned that the central bank's policy could jeopardise the construction of up to 5000 homes a year.
Reserve Bank Deputy Governor Grant Spencer said the bank had decided on the exemption after consultation with the industry.
However, Endeavour Homes owner Dick Baker said that while the exemption was a good idea, most new home buyers in Nelson were not first home buyers.
This was mainly because the price of sections was so high in Nelson, he said. Most of his customers were second and third home buyers.
Sections had sold in the Brook Valley for $125,000, and a significant number of those were sold to first home buyers who could build a house for $300,000, Mr Baker said.
However, in Richmond there were probably no sections under $200,000, and "pretty ordinary" sections cost at least $250,000.
To get cheaper sections, cheaper land was needed, he said. For section prices to drop, there had to be a lot of land available, it had to be reasonably priced, and there had to be reasonable local government fees.
"In Nelson, there are none of those things. The land is too dear, there's not enough of it, and the councils charge too much."
Jennian Homes Nelson Bays director Simon Collett said new builds should have been excluded from the LVRs in the first place, and he was pleased that the Reserve Bank had taken into account the industry's strong feelings.
Without the exemption, up to 30 per cent of new building inquiries were being affected by the LVRs, which equated to thousands of new houses, based on current consent forecasts, he said.
"Bricks and mortar have been seen as a secure investment for generations of Kiwis, but this vision has been slipping away for many young New Zealanders.
"This is a very welcome Christmas present for the industry and the thousands of New Zealanders who have a building new home as their goal in the future."
Mike Pero, in Nelson for the opening of his mortgage broking company's new Stoke office, said it was fantastic news.
"It does open opportunities for first home buyers. It's a fantastic outcome that will grow the industry, and builders will be busy again."
Mr Pero said his company had been working on an initiative with builders but the exemption meant it would not be needed.
A lot of houses needed to be built, he said, and he expected a catchup as the economy improved.
While interest rates might rise 1 or 2 per cent, the effect would not be too significant, he said.
Real estate agent Mitchell Wilson, who owns the new Stoke franchise, said the LVRs had resulted in fewer people attending open homes, although those who did were genuine buyers.
The number one factor for first home buyers in Stoke was to find a sunny home, he said.
"They're looking for two bedrooms. Some work is fine, like a new paint job, but most of all they want sunlight, heating and insulation."
Many homes in their price range in other places were not as sunny and warm, he said. "People are now looking for clean and healthy homes."
His advice to first home buyers was to look at many properties and be realistic about what they could afford to get on to the property ladder.
At the other end of the market, a lot of retirees were downsizing because they no longer needed a bigger home, and to take some capital out of their properties.
Mr Spencer said the new exemption would apply to all qualifying construction loans from October 1 this year.
Registered Master Builders Federation chief executive Warwick Quinn said the issues related to ensuring housing supply was maintained, so that the LVR policy could have the maximum effect. "With the exemption now in place, building companies will be able to plan with more certainty, and those companies who were contemplating restructuring in early 2014 and laying off staff will now hopefully not need to."
- The Nelson Mail
Do you agree with the city council's decision to put a 30-minute limit on buskers' performances?Related story: (See story)