Who can afford KiwiBuilds?
Analysis from Housing Minister Phil Twyford’s own ministry shows that two-thirds of firsthome buyers would not be able to comfortably afford the first lot of
$579,000 KiwiBuild houses. But calculations from the banks suggest they would offer a much wider swath of Kiwis mortgages on the homes.
Both analyses were shown to Stuff alongside the Cabinet paper setting out KiwiBuild’s eligibility criteria.
The conservative analysis from the Ministry of Business Innovation and Employment (MBIE) looked at whether the buyers would be able to service mortgage payments for less than
30 per cent of their income, an international ‘‘rule of thumb’’ for affordability.
Close to a third of renters in Auckland already pay more than a third of their income in rent.
The MBIE analysis found – assuming a 10 per cent deposit – that a family would need income of at least $121,000 to buy a home at the much lower price point of
$515,000, and that just 32 per cent of recent first-home buyers had income in that range.
The calculations from the banks show a much sunnier picture for KiwiBuild, with about
57.5 per cent of recent first-home buyers able to afford a $579,000 KiwiBuild and about 80 per cent of buyers looking at the homes outside of Auckland, in with a shot. The banking calculators – which assumed a 20 per cent deposit and one child – said buyers would need a household income of between $80,000 and
$99,000.
Close to two-thirds (57.5 per cent) of recent first-home buyers across the country had household income above $90,000, according to MBIE.
Median household income in Auckland is $97,300, compared with $81,000 nationally.
For the houses outside of Auckland, which are capped at
$500,000, the banks say an income of between $72,000 and $92,000 would be acceptable.
Close to 82 per cent of recent first-home buyers had a household income of above $65,000, suggesting many would be able to afford one of the non-Auckland homes. The first three-bedroom KiwiBuild homes in Papakura will be priced at $579,000 but the cap in Auckland and Queenstown is $650,000 for three bedrooms,
$600,000 for two, and $500,000 for anything smaller.
Half of the 100,000 KiwiBuild homes will be built in Auckland.
Every KiwiBuild home built outside of Auckland or Queenstown will cost less $500,000 or less.
Both sets of analysis are hamstrung by the fact that their database of the incomes of firsthome buyers is based on recent buyers – so by definition every buyer was able to afford a deposit on something.
The Cabinet paper, seen by Stuff, indicates that in ‘‘highdemand areas’’ like Auckland and Queenstown Twyford has a household income of above $80,000 in mind.
‘‘Through KiwiBuild this Government is committed to providing the opportunity for home ownership to families who are currently locked out of purchasing their first home. This is a broader cohort of families ranging in household income from $80,000 to $180,000 in highdemand markets,’’ the paper reads. Twyford acknowledged the price points would be too high for ‘‘many families’’.
The paper mentions a progressive home ownership scheme, where renters might be able to build up equity in a house, which the Government is still considering. However it notes the funds for this would likely have to come from outside KiwiBuild’s $2b budget allocation.
Twyford told Stuff KiwiBuild ‘‘was never designed to be a welfare programme’’.
‘‘It is aimed at fixing a market failure to build affordable homes so families can once again realise the Kiwi dream of home ownership. It is part of wider reform of the housing sector by our Government which includes helping lowincome families by modernising tenancy laws for the many families that rent and building 6400 new state houses. The Government is also boosting family incomes by growing the economy, lifting wages, and bringing in the Families Package that gives an average of $75 a week to most families with kids.
‘‘The combination of affordable KiwiBuild homes and higher incomes will make home ownership possible for more families.’’
Since the Government opened the doors to KiwiBuild registration last Wednesday, more than 25,000 people have registered their interest.
The Cabinet paper revealed further details around the purchase process and eligibility for KiwiBuild homes.
Buyers need to be New Zealand citizens or permanent residents, be first-home buyers or qualifying ‘‘second-chancers’’, and earn less than $180,000 a year for a couple or $120,000 for a solebuyer.
The Cabinet paper showed that only one partner in a couple would need to be a New Zealand citizen or ordinary resident.
It also indicates the Government is working on how to allow family trusts to buy the homes, as this could be quite complex.
The actual buying process is set out by the paper.
After the KiwiBuild unit publishes details of available homes, applicants will have to submit a signed offer, confirmation of their eligibility, and pre-approval of a loan.
If there is more demand than there are units, which is likely in the first years of the scheme, a ballot will be run.
Applicants will be allowed to be involved in more than one ballot at once but could only purchase once.
Buyers will have to sign a statutory declaration indicating they will not sell the home or rent it out for at least three years.