Is the First Home grant “out of tune” with this property market?

A recent article on TVNZ.co.nz compared residential figures and First Home grant eligibility criteria, and found that most first-home buyers in main centres would not qualify – with the exception if Christchurch. Time for an update?

First Home Grant: How it works

The First Home Grant (formerly known as HomeStart Grant) was launched in 2015 to help an increasing number of New Zealanders afford their first property.

Eligible first-home buyers looking to purchase an existing property can receive up to $5,000 if going alone, or a combined grant of up to $10,000 if doing it with other eligible buyers. Those buying a new home can receive up to $10,000 if an individual, or a maximum combined $20,000 if purchasing with other eligible buyers.

Who’s eligible?

First of all, eligible first-home buyers must have been regularly contributing the minimum required contribution to KiwiSaver for at least three years (which don’t have to be consecutive). There are other criteria, including income requirements, deposit requirements, and property requirements.

Click here to learn more and please let us know if you have any questions.

The problem with current property requirements

To be eligible, the property purchase price must be within the regional house price caps. Click here to learn more or see the table below to find out what the caps are in your area:

Region	Existing/older properties	New properties
Auckland, Queenstown Lakes District	$600,000	$650,000
Hamilton City, Tauranga City, Western Bay of Plenty District, Kāpiti Coast District, Porirua City, Upper Hutt City, Hutt City, Wellington City, Tasman District, Nelson City, Waimakariri District, Christchurch City, Selwyn District	$500,000	$550,000
Rest of New Zealand	$400,000	$500,000

Source: kaingaora.govt.nz – As of 26 June 2020

While these caps may have been appropriate when the grant was introduced, TVNZ pointed out that most property sales in the main centres would hardly qualify.

Here’s a regional overview:

Region	Proportion of properties above price caps
Queenstown Lakes	91 per cent
Wellington	90 per cent
Porirua	89 per cent
Tauranga	88 per cent
Auckland	86 per cent
Tasman District	83 per cent
Kapiti Coast	82 per cent
Western Bay Of Plenty	80 per cent
Hutt Valley	77 per cent
Hamilton	76 per cent
Nelson	72 per cent
Nelson	72 per cent
Selwyn District	70 per cent
Waimakariri District	67 per cent
Christchurch	57 per cent
Rest of New Zealand	60 per cent (on average)

Source: TVNZ

Should property caps change?

The Government is currently investigating price caps, as part of a post-Covid review of housing affordability measures. But for the time being, experts are not unanimous.

While REINZ Chief Executive has called for a review to ensure that price caps are appropriate at a regional level, economist Shamubeel Eaqub believes caps should remain the same, to avoid putting borrowers in a vulnerable position.

“It’s a rock and a hard place with the cap, because you don’t want so much debt among these new home owners that they become financially vulnerable, but at the same time, those caps need to keep pace so that enough homes are available for people to buy,” Eaqub conceded.

All the help you need for your first-home purchase

If you’re looking to buy your first home, and belong to KiwiSaver, there may be extra help coming your way. But it’s important to understand what first-home grants and KiwiSaver first-home withdrawals entail, and how to access this money in a timely manner.

Please don’t hesitate to contact us. We can help you with information about the first-home help you may be entitled to, making that all-important first step on the property ladder as smooth and exciting as it can be.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current development or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.