If there’s an upside for anyone involved in the housing market in the months ahead it might just be first home buyers, say experts, who hope tomorrow’s Budget brings some cheer.
Lesley Harris, from the First Home Buyers Club, would love the Government to give a little bit of good news to this more youthful segment of the market which has faced a lot of disappointment trying to get on the housing ladder in the last few years.
That could be in the form of changes to the Home Start grant, she says.
“We are seeing things being quite good at the moment for first home buyers because we’ve obviously got the loosening of the LVR for a period of time and that in itself will make a difference, combined with the very low interest rates, so that’s a good thing.
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“The one thing, if we had a wish list, probably would be the Home Start grant.
“If it could at least possibly have the cap removed, because at the moment we’re still in Auckland at a $650,000 cap to get that Home Start grant but you can’t really get anything much for under $650,000 so stretching that cap out I think would be an amazing thing.”
Not fit for purpose
Harris suggests the cap be lifted to the median house price for Auckland, and likewise for the regions, because currently first home buyers who qualify for the grant can’t buy a home worth more than $650,000 which “seems a bit crazy.”
“If you look at countries overseas, often they will put some money in towards first home buyers’ deposits and I think New Zealand has got the starting point in that Home Start grant but I don’t think it’s fit for purpose in a lot of cases.”
The price first home buyers can spend on a home has only increased fractionally since the grant came in a couple of years ago, but even at the start the cap was too low, she says.
“It should have started at $750,000 and maybe should now be at $850,000.
“There’s a massive, big gap in the market for what that Home Start grant is supposed to be for, which is helping people bolster their deposits and get into homes, and it needs to be revisited and some of the strings need to be loosened a little bit around some of the thresholds to make it more of an up to date policy.”
A new cap, along with the record low interest rates, the removal of the LVR restrictions, a predicted softening of the market and less reliance on auctions as a sales method would all bode well for first home buyers, she says.
“If they have managed to keep their jobs and have their job security, it’s quite a good time really for them to take advantage of the situation.”
Revamp KiwiBuild
Mortgage broker Rupert Gough, of the Mortgage Lab, says he would like to see a revamp of the failed KiwiBuild scheme.
“KiwiBuild was never going to allow developers to develop enough properties to meet the numbers they were talking about so the bottleneck was developers getting consents and financing through.
“They came up a way for buyers to do it through KiwiBuild but hadn’t allowed the houses to be built, so I think some sort of process that shortcuts that so developers can produce enough houses.”
Next on Gough’s wish list is a reinstatement of investment property owners being able to claim tax against losses.
“If you’re looking at the view of supporting people and their cash flow over the next year or two, bringing back tax deductible losses for investment properties may really help people at a time when they need a bit of cash.”
The property market is often overlooked in Budgets, Gough says, but it’s a key part of the economy and encouraging property purchases not only puts people in homes but allows them to build wealth.
Need for confidence
Mike Pero, from Mike Pero Real Estate, says prior to Covid-19 a lot of people were in a position to buy their first home but many have since seen their KiwiSaver fall and thus their deposits dwindle.
And while the Government has removed the LVR restrictions, banks are probably still nervous about higher levels of lending, he says.
“What I think is ideal is if the Government underwrites the increased exposure from 80 to 90 per cent, to give the banks the confidence to make those decisions, because the banks are saying ‘well, it’s alright for you to say we can go to those higher levels but you want us to wear the risk’.
“I think if the Government said that in 80 or 90 per cent of the cases where you’ve got a prospect who wants to borrow the extra 10 per cent then the Government will underwrite the risk.”
Economist Tony Alexander expects potential house buyers will be worried about their incomes, but says there is not much the Government can do beyond the assistance measures likely to be announced for employment generally.
He is more interested in what the plans are for construction.
“Confirmation of an expansion of the state house building programme to start straight away would be useful.”
Initiation of a programme to contact developers of existing developments who are suddenly facing a dearth of buyers to offer them to sell units to the Government, at discounted prices, could give a good spread of social tenants around the likes of Auckland, he says.
“Help those builders, and help address shortages of social housing.”
