Price caps out of touch, say first-home buyers
Small percentage of Auckland houses sold at prices below caps
Young couples say a Government grant designed to help first-home buyers save enough money for a mortgage deposit is out of touch with sky-high house prices.
Under the First Home Grant, couples can get a $10,000-$20,000 Government-paid lump sum to add to their deposit.
In Auckland the criteria includes paying no more than $600,000 for an existing home or no more than $650,000 for a new-build house.
Yet just 16 per cent of homes sold in Auckland in the past year went at prices below those caps, according to Real Estate Institute of NZ figures. Many of those were in suburbs between 30km and 50km from the city centre.
Housing Minister Megan Woods is now considering whether the caps need to be raised, a spokeswoman said.
Kevin Russo, a mortgage adviser in Tauranga where the price caps are $500,000 for an existing home and $550,000 for a new build, said Bay of Plenty buyers had the same problem.
“We’ve got a massive [number] of first-home buyers wanting to get into the market at that affordable level where they qualify for the first-home grant,” he said. “But it’s gotten extremely hard now.”
House prices have remained stubbornly high despite most pundits
tipping them to fall as a result of the Covid-19 economic downturn.
Economists had predicted house prices to fall anywhere between 7 and 15 per cent this year.
However, Russo said the market had bounced back almost immediately post-lockdown. “Banks are overwhelmed with applications; the market is booming,” he said.
Yet while buyers were keen, banks were “very reluctant” to lend in the current economic climate to firsthome buyers who had small deposits saved.
This struggle to secure home loans was being compounded by the Government’s unrealistic First Home Grant price caps, he said.
Decent homes advertised for less than $500,000 in Tauranga were “selling extremely quickly” and attracting fierce bidding wars.
Russo hoped to see the price caps scrapped altogether. They were last raised in mid-2016, from $500,000 to $600,000 in Auckland and $400,000 to $500,000 in Tauranga.
Auckland’s median sale price, meanwhile, hit $910,000 in May, up $86,000 on May 2016, according to Reinz figures. Bay of Plenty median sales prices had jumped $125,000 over the same period.
Woods’ spokeswoman said advice had been sought around “what, if any changes” were needed to the First Home Grant price caps.
Loan Market mortgage adviser Bruce Patten said competition for
Auckland homes under the price cap was equally fierce.
He pointed to the new Paerata Rise development 40km south of Auckland’s city centre. It had four threebedroom, new build homes on sale for $650,000 last weekend and each was snapped up immediately.
Reinz chief executive Bindi Norwell would also like to see the First
Home Grant price cap raised.
Under the current cap, just 4 per cent of properties sold in the North Shore would have qualified for the grant, she said. “The area where you’re most likely to be able to use a First Home Grant to purchase a property is in the Franklin and Papakura Districts — with 27 per cent of properties sold below the threshold.”