Prime Minister John Key made the National Party’s big announcement on housing at the weekend, enabling qualifying first-homebuyers to borrow more, especially in Auckland.
Affordability campaigner Hugh Pavletich promptly labelled it “a land speculators’ welfare scheme” at the expense of all others.
Mr Key said the changes to KiwiSaver would help about 90,000 lower & middle-income first-homebuyers over the next 5 years – 40,000 more than would be helped under current policies.
He said the 3 major changes were:
- Replacing the KiwiSaver first-home deposit subsidy with a KiwiSaver HomeStart grant, doubling the support for buying a new home and increasing the house price limits
- Enabling larger KiwiSaver first-home withdrawals by including the member’s tax credit, meaning first-homebuyers would be able to withdraw all of their KiwiSaver savings except the $1000 kickstart
- Expanding eligibility for Welcome home loans by aligning the house price caps with the new KiwiSaver HomeStart grant.
Housing Minister Nick Smith followed up with the detail of the $218 million HomeStart package, which he said would encourage the building of more affordable new homes: “We are roughly doubling the number of people receiving a Government grant to buy a first home from 10,000/year to 20,000/year, and doubling the Government grant they are eligible for if buying a newly built home.
“The focus of this package is to increase the supply of new housing and to encourage housing companies to build homes in a price range affordable for first-homebuyers.
“The house price limits for KiwiSaver HomeStart & Welcome Home loans will be $550,000 in Auckland, $450,000 in Wellington, Christchurch & other similarly priced housing markets, and $350,000 for the rest of the country.”
Currently, first-homebuyers are eligible for a grant of $3000 after 3 years in KiwiSaver, $4000 after 4 years and $5000 after 5 years. Under KiwiSaver HomeStart, these grants will double for the purchase of a newly built home.
The change to the withdrawal policy will increase the maximum withdrawal amount by $512/year for every year a member has contributed. It’s restricted to KiwiSaver members buying a first home, who have been contributing for a minimum of 3 years. The new grant & Welcome loans have additional criteria of borrowers having an income below $80,000 for an individual & $120,000 for a couple, and the house being purchased must be below the regional house price limits.
“This new package extends the help for all first-homebuyers who are in KiwiSaver, although the amount of extra help depends on the amount they earn, the number of years they have contributed and whether the house they are buying is new and whether it is within the regional house price caps. The support is targeted to people on modest incomes buying modest homes.
“The package means a couple in Auckland each earning $50,000, who have contributed to KiwiSaver for 5 years, will be able to withdraw $35,000 and receive a $20,000 KiwiSaver HomeStart grant, giving them a $55,000 deposit on a new home. With the Welcome Home loan scheme allowing only a 10% deposit, they will be able to buy a home up to $550,000 in value.
“Home ownership has been in decline since the mid-1980s and census data shows the greatest decline amongst 20- to 35-year-olds. This package is targeted to help this group and enable them to get on to the housing ladder earlier. Two-thirds of the group expected to benefit from KiwiSaver HomeStart are in this age bracket.
“This is the most significant Government support for first-homebuyers in more than a generation and will come into effect on 1 April 2015. KiwiSaver HomeStart will cost an additional $218 million over the next 5 years.”
Dr Smith said the additional expenses incurred in 2014-15 would be a charge against the between-Budget contingency established as part of Budget 2014. The additional expenses incurred in 2015-16 & later years would be a precommitment against Budget 2015.”
Pavletich: It will fuel housing inflation
Mr Pavletich, of Christchurch, co-author of the annual Demographia international housing affordability, survey, said making more money available to first-home borrowers “should properly be regarded as a land speculators’ welfare scheme, paid for unnecessarily out of young first-homebuyers’ savings and by excessively taxed taxpayers.
“This is a cynical attempt by the National Party to buy votes at others’ expense. It only fuels housing inflation. It is likely the Reserve Bank will need to respond by lifting deposit requirements further and increasing interest rates. This will in turn lift the $NZ, damaging the export sector further. So far this year, the dairy sector has taken a 40% hit in prices, the logging sector a 50% hit.
“With this cynical approach to the housing issue, Mr Key is punishing our exporters as well by not allowing the $NZ to adjust to these dramatic price falls. This will cost jobs and risk putting vulnerable exporters to the wall, unnecessarily.”
Attribution: Ministerial & Pavletich releases.