Income, price limits squeeze first-home buyers aiming for Government grant

Thursday, 21 November 2019

Many first-time buyers are keen on the First Home Grant but then find out they don't qualify, a developer and mortgage brokers say.

First home buyers ruled out of a Government grant have prompted calls for a rethink on income and property price limits.

The First Home Grant gives buyers a cash boost for their deposit, and more to those buying a new home or land.

But lifting the income limits would help a heap more first home buyers into the market, Atlas Property's Andrew Yeoman said.

'You can't get a mortgage unless you're earning a certain amount of money, but you can't get the First Home Grant if you're earning too much money.'

* Panmure apartment building offers shared cars rather than car parks

The rise of KiwiSaver.

* Apartments with no car parks reach central Hamilton

* Hamilton homes, sections, shrink as apartments become new norm

* Tackling Auckland's housing crisis by rethinking urban design**

Yeoman and some mortgage brokers he works with want changes, though one said a recent relaxation in lending tests eased pressure.

Nationally, 40 to 50 per cent of first home buyers use the First Home grant, Government data says, and $84.8 million was paid out in the year to June 2019.

Price caps have been tweaked before but there are no immediate plans to review them.

Atlas Property develops in Hamilton and Auckland, and most first-time buyers use KiwiSaver funds and the grant, Yeoman said.

'You can't get a mortgage unless you're earning a certain amount of money, but you can't get the First Home Grant if you're earning too much money,' Atlas Property's Andrew Yeoman says.

And more could if the grant's income cap - $85,000 for a single buyer or $130,000 for two or more - was raised or removed.

'Some families … they might have to support three or four children so they might have a higher income to be able to do that,' Yeoman said.

The grant also requires homes to fall under a price cap, which varies by region.

The grant imposes limits on income and the price of the house being bought (file photo).

Price caps for new properties are $650,000 in Auckland, for example, $550,000 in Hamilton, or $500,000 in Hawke's Bay.

Yeoman would like them to increase, but currently builds smaller homes on smaller sections - 'basically, you're talking townhouses and apartments'.

Around New Zealand the maximum assets a previous homeowner can have, and still be allowed to take money from KiwiSaver to buy a new house, varies between $80,000 and $120,000.

Other Hamilton developers contacted said they would struggle to build at the required price, given land and compliance costs.

Christchurch-based broker Brenda Murney has seen home buyers unable to get the First Home grant because they earn too much.

'Obviously, if the caps were higher - income-wise and build cost - it would just open it up to more people,' said Murney, who works for Tony Mounce Mortgages.

Higher house price caps could encourage more new builds, she said.

The $550,000 limit is realistic for Christchurch and she has seen builds priced accordingly.

Yet it would be tough in Hamilton, and only apartments would fit under Auckland's $650,000 cap.

Almost every first-home buyer asks about the grants, Just Financial managing director Arthur Ramani said, but many are disappointed by strict criteria.

He's based in Auckland and said it's especially tricky for families with two or three children struggling to get more than a two-bedroom home.

However, developers are promoting smaller homes as a way to get a foot in the door, and some families relocate to get a standalone house at the right price.

Squirrel Mortgages' Peter Norris thinks Auckland's price cap could easily go up to $700,000 to $750,000, but said plenty of properties fit the current criteria.

Until a few months ago, he would have supported the call for First Home income limits to increase.

But a recent relaxation in bank mortgage test rates means people can borrow six or seven times their income - depending on circumstances - instead of about five times.

That has a bigger impact than Government policy, he said.

Housing affordability is an issue in many areas of New Zealand, the Ministry of Housing and Urban Development's Caleb Johnstone said.

Recent First Home Grant changes include lifting Wellington's new build price cap to $550,000, and allowing multiple buyers to combine their grants.

'There are no immediate plans to review the price caps or income caps further.'

It's tough to build under the caps, University of Auckland senior lecturer in architecture and planning Bill McKay said.

But hankering after a standalone house may be unrealistic and there's increasing demand for townhouses, duplexes and apartments.

They allow land costs to be shared, for example, and tend to be cheaper and lower maintenance.

Around Hamilton, duplexes have shown particularly 'chunky growth' in the past three years, city council data shows.

There were 18 built in 2015, but that climbed to 126 in 2018.