KiwiBuild: what does it mean for first home buyers?

Housing Market Written by Sam Ludbrook, Jul 23 2018

For those of you who have read my recent article Top 5 first home buyer tips, you may remember me talking about the opportunities that have presented themselves over the last year or so to potential first home buyers.

Where there’s a will there’s a way, as they say, and that certainly seems to be the case with the current New Zealand property market.

Things are looking up

Seismic shifts in banking regulations, credit policy and general political will, has seen the pendulum swing from favouring residential property investors to those looking to purchase owner occupied property. One can almost hear a collective sigh of relief from all those young millennials (and their parents!) looking to purchase their first home.

Political pressure has played a large part in the changes we are currently witnessing in the New Zealand property market and in this regard, we are starting to see a number of government initiatives having a positive impact. In the case of KiwiSaver for example, changes to the HomeStart grant now enables qualifying couples to obtain up to $10k per person for those looking to purchase a new build as their first home (terms apply). This can mean up to $20k for a couple purchasing their first home! A sum certainly not to be sniffed at.

Unitary plan changes and the release of land for developments are also beginning to equate to more housing stock in the market. With current LVR limitations now in place, many investors are finding they are unable to release enough equity to purchase their next investment property. With these factors at play, we are now starting to see a lot more purchases going through for first home buyers, who can potentially get into their first home with as little as 5-10% deposit.

Where KiwiBuild comes in

One of the more recent plans to assist first home buyers has been the KiwiBuild initiative. The government’s plan is to build up to 100,000 new homes within the next 10 years. These properties will be limited to first home buyers or those who may qualify under specified second chance rules.

You can read the full KiwiBuild criteria here, but in summary, properties will be limited to NZ citizens or permanent residents whose income does not exceed $120k for an individual or $180k for a couple. Those looking to purchase one of these properties must intend on living in the property for up to three years. Regional price caps will apply. In the Auckland/Queenstown regions for example, the maximum purchase price will be $650k.

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It will be interesting to see whether banks will get behind this scheme. In the past, we have seen hesitation from some banks to lend on affordable housing projects due to the on-sell rules (encumbrances) placed on these properties. When I spoke to a number of the banks recently, most were still assessing the nature of the rules around the on-selling of the property within the first three years. That said, my feeling is that most will look to support this initiative.

More detailed criteria can now be found on the Ministry of Business, Innovation and Employment website and interested persons can also register their interest here.

Download the KiwiBuild guide

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