House price limits could be eased

Govt measure reveals big group shut out of home ownership

Price caps for first-home buyer grants could be lifted yet again in Auckland if house prices remain stubbornly high, the Government says. The potential review of the KiwiSaver HomeStart grant comes as a new measure reveals the high proportion of renters being shut out of the housing market.

The Ministry of Business, Innovation and Employment’s Housing Affordability Measure was first proposed in 2012 but is only now seeing the light of day. The first official measure of affordability, it said four out of five firsthome buyers could not afford to get on the property ladder in mid-2015 — the most recent figures available.

The share of people shut out of the housing market nationwide had remained relatively steady at about 81 per cent since 2009, except for in Auckland, where it had risen to 86 per cent.

Responding to the new MBIE data, Prime Minister Bill English reiterated the Government’s argument that councils had failed to allow enough houses to be built in the past. “We’re working with them now to get more houses built so they can be more affordable.” The Government has established a $1 billion infrastructure programme to assist councils in lifting housing supply, though councils are yet to begin tapping into the fund.

English said National’s housing supply programme was backed by the HomeStart scheme, which offers first-home buyers grants of up to $10,000 for an existing house, and $20,000 for a new house.

The scheme would eventually allow 90,000 to get their first home.

So far, 27,000 people had received a HomeStart grant, which were available for houses which cost less than $600,000 in Auckland (or $650,000 for a new house). The price cap was lower in other parts of the country.

But uptake had risen only slightly in Auckland in the past year despite easing of restrictions so people could earn more and buy more expensive houses and still qualify for the grant.

The house price limit was raised from $550,000 in Auckland last year because soaring house prices had made the scheme virtually defunct. It had previously been raised from $350,000 to $485,000 in 2013.

When Housing Minister Nick Smith bumped up the price caps in 2013, he predicted the number of Aucklanders taking up the subsidy would rise to 3000. Instead, only 1250 people took up a grant in the past year, up from 1139 the previous year.

He said it appeared city househunters were holding back until prices stabilised and supply rose.

Smith said the HomeStart price caps were regularly reviewed to make sure they were realistic, and could be adjusted again if not enough people were able to access them.

For now, he was happy that the scheme was on track to meet the target of 90,000 grants.

Smith said he was confident efforts to lift supply had gained some traction since then the 2015 data.

He was encouraged that “in a market like Christchurch housing affordability has improved very considerably” as a result of measures to free up the supply of land.

“That is a clear signal of the sort of measures that will work in other markets like Auckland.”

The affordability measure showed a larger share of people could not afford houses under Labour in 2008 than under National in 2016. But that did not take into account the plunge in interest rates, which were above 10 per cent during the global financial crisis but were now below 6 per cent.