First-home buyers who are unable to draw upon the help of "the bank of mum and dad" are in line for a boost.
BNZ today announced that it is launching a shared ownership scheme, which will give eligible customers saving for a deposit the opportunity to get into their home faster.
The scheme - which will see BNZ partner with a home finance company - is the first of its kind offered by New Zealand's big banks.
BNZ chief customer officer, consumer and wealth Paul Carter said: "Some New Zealanders are lucky enough to have mums and dads topping up their savings, so they can get the deposit to buy a house.
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"Not everyone has family to call on in this way and that’s where shared ownership could help."
Shared ownership - which is prevalent in Europe - will allow Kiwis who are part way to saving for a deposit an opportunity to buy sooner than they thought.
Although it is not designed to be a silver bullet to New Zealand’s housing challenges, it will provide Kiwis looking to buy a home another option to consider.
The bank floated the idea before Christmas to get savers thinking because it realises the concept isn’t widely understood in New Zealand. The exact details are yet to be announced.
It is aimed at first home buyers on modest incomes, similar to those who might qualify for KiwiBuild. It's likely buyers will be required to live at the property for a minimum number of years.
The shared ownership scheme will launch with a pilot targeted at potential customers looking to buy qualifying new build houses in Auckland. “While we are launching small, we and our partner will be looking to make shared ownership available to more first home buyers wherever they are in New Zealand after the launch next year,” says Mr Carter.
BNZ says it would treat a shared ownership customer the same as any other first home new build customer for KiwiSaver withdrawals. “HomeStart would be something the customer would need to work through Housing NZ with.”
Housing Minister Phil Twyford said: “We are looking at a similar scheme for low income earners so it’s great to see BNZ looking at a progressive home ownership model like this.”
The details of BNZ's scheme have not yet been announced but buyers would need to meet BNZ’s standard terms and conditions and lending criteria and have a good credit history.
In shared ownership schemes operated around the world, a buyer would typically put up 10 percent of the deposit and the third party investor another 10 percent, with the bank lending the remaining 80 percent. Buyers avoid paying the low equity premiums they would be hit by if they’d borrowed more than 80 percent.
As the purchaser builds up capital, or is able to refinance, they can buy out the third party’s 10 percent at the current prevailing market value. The home buyer benefits from any capital growth on their share, including that which is mortgaged.
There is no fixed percentage for shared equity, meaning the third party’s share could be more or less than 10 percent as long as the customer has majority share of the house.
Bindi Norwell, REINZ chief executive, says: "Shared equity models have proven to be successful overseas and are a good way to help first time buyers to get onto the market. REINZ is supportive of measures that help Kiwis to get a foot on the property ladder – particularly as home ownership is at its lowest level in 60 years and house prices are continuing to rise around much of the country continuing to put housing affordability out of the reach of many
"In Auckland with a median house price of around $850,000, for first time buyers looking at a lower quartile house around the $650,000 mark that means saving a deposit of around $135,000 which for people on an average wage will take 16 years – this is just unsustainable, so models such as shared ownership will go a long way towards helping people who otherwise are locked out of the market."
