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NZ Experts: Middle class the winners

Property Here - Tuesday, August 13, 2013

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Mortgage brokers don't expect the Government's changes will help many more into the market. Photo / Greg Bowker
Mortgage brokers don't expect the Government's changes will help many more into the market. Photo / Greg Bowker

New rules for KiwiSaver subsidies to help people buy their first homes will help middle-class couples but will knock out lower-income families, mortgage brokers say.

The changes, announced on Sunday by Prime Minister John Key, lift the combined income limit for a couple to obtain the subsidies from $100,000 to $120,000, and raise the maximum price of a home they can buy in Auckland from $400,000 to $485,000.

Maximum home prices also rise in 14 of the country's 66 other local body districts - to $350,000 in Hamilton, Tauranga, Thames-Coromandel, Western Bay of Plenty and seven other districts, $400,000 in Christchurch and Selwyn and $425,000 in Wellington and Queenstown-Lakes.

The limit remains $300,000 in other areas.

But Bruce Patten of Loan Market mortgage brokers said the higher limits would be "cancelled out" by a requirement for first-home buyers to pay 10 per cent of the house price as a deposit. Until now, no minimum deposit has been required.

"I think probably it's your middle class that will benefit from it, especially with pushing out the income threshold," he said. "There will be a lot of people who are just above the $100,000 threshold.

"But it will close the door to some others because the low income earners don't have enough in their KiwiSaver to get to the new 10 per cent threshold.

"So it's certainly not going to help the low socio-economic group."

Housing Minister Nick Smith said on Sunday that the new rules would more than double the number of first-home buyers obtaining the subsidy, from 4700 last year to an average of 11,000 a year over the next four years.

In Auckland, he said, the number would treble from 1030 last year to 3000 a year.

But Mr Patten said he would be very surprised if the numbers increased by much.

"I would say that 80 per cent of the first-home buyers making KiwiSaver withdrawals only just have 5 per cent [deposit] in the current-priced market," he said. "Very few have a 10 per cent deposit."

First-home buyers can withdraw all of their own contributions, their employers' contributions and their investment returns from their KiwiSaver accounts after three years.

About 11,000 people have withdrawn their savings each year since 2010, averaging about $10,000 each or around $20,000 for a couple.

Those who qualify for the first home subsidy get a gift through Housing NZ of a further $1000 for every year they have saved, up to $5000 each.

But with a combined total of about $30,000, and the requirement for a 10 per cent deposit, most couples still won't be able to buy a house worth more than about $300,000.

That is enough to buy a lower-quartile house - in the lowest quarter of sales - in most provincial areas.

June's Roost home loan affordability report listed lower-quartile prices at $267,000 in Hamilton and $288,000 in Tauranga, and real estate firm Harcourts said yesterday that 25.4 per cent of homes sold this year went to first-home buyers.

But lower-quartile prices in all parts of Auckland are well above $300,000 - $396,700 in West Auckland, $410,400 in South Auckland, $453,800 on the central isthmus and $552,500 on the North Shore.

Jeff Royle of Auckland mortgage brokers iLender said the new rules would not make any difference to Auckland first-home buyers because over the past two months, banks had stopped lending more than 85 per cent of a property's value because of an expected Reserve Bank move to limit high loan-to-value ratios.

"It doesn't matter what the Government now say in terms of making KiwiSaver more accessible - if the net result is still not up to let's say 15 per cent, then it's not going to work."

First-home subsidy

What: $1000 subsidy for every year of saving, up to $5000 each ($10,000 for a couple).
Current criteria: Combined income up to $100,000; house worth up to $400,000 in Auckland or $300,000 in most other places; no minimum deposit required.
New criteria: Combined income up to $120,000; house worth up to $485,000 in Auckland or $300,000-$425,000 elsewhere; 10 per cent deposit required.
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