Changes to KiwiSaver for first home buyers welcomed

New Zealand’s largest real estate company, Harcourts has welcomed changes to the KiwiSaver scheme for first home buyers that came into effect today, but would like to see more done to encourage development of all types of housing, particularly in Auckland.

The KiwiSaver HomeStart grant, which replaces the KiwiSaver First Home Deposit Subsidy, allows those on modest incomes - $120,000 for couples or $80,000 for individuals - to apply for a grant that can be used towards the purchase of a new or used home.

The changes taking effect today will allow eligible first home buyers purchasing a new home to apply for a grant that is double the amount available for the purchase of an existing home. The maximum grant available for individuals purchasing a new home is $10,000 and for couples $20,000.

Harcourts CEO Hayden Duncan says that while the changes are a step in the right direction, it will remain difficult for Kiwis looking to buy their first home in the major centres.

"It’s clear that the loan to value restrictions have had an impact on first home buyers. Our client survey data indicates that first home buyers now make up a smaller share of the market - 21% in 2014 compared to 26% in 2013.

"The changes to KiwiSaver taking effect today are designed to entice first home buyers to purchase newly built apartments and houses in order to help stimulate further development of lower-cost housing.

"However, the barrier to entry in Auckland especially, and to a lesser degree in Christchurch, remains the ability to save the 20% home loan deposit required by most lenders. With current house prices, it’s hard to see these changes having a significant impact on that," says Mr Duncan.

"It’s also important to remember that funds from KiwiSaver are only made available at settlement, so they cannot be used as part of the initial home deposit. First home buyers still need to front up with the full deposit amount that is agreed with the vendor."

Under the changes to the KiwiSaver scheme, the house price limits for first home buyers have been increased to $550,000 in Auckland, $450,000 in Wellington and Christchurch, and $350,000 for the rest of the country.

Mr Duncan says that unless more affordable housing is built, and quickly, most first home buyers will remain priced out of the market.

"Properties in Auckland under $550,000 are becoming increasingly difficult to come by and there are no indications that will change. It’s very difficult to find good entry level housing," he says.

"Outside Auckland where housing is more affordable, we do expect the changes taking effect today to encourage first home buyer activity. Regional New Zealand was hit hard by the LVR restrictions and we welcome any stimulus that can support first home buyers venturing into the property market," says Mr Duncan.

"Owning your own home is important to Kiwis. Property ownership provides the lifestyle, financial security, and stability that every family deserves."