“Tweaks” to the Government’s first home buyer schemes do not address the biggest stumbling blocks buyers face at the moment, experts have told OneRoof.
Last week, the Government announced during the Budget that it had lifted the price caps for First Home Grant scheme (up to $875,000 in Auckland) and was removing the price caps for those wanting to buy a home through the First Home Loan scheme.
But housing market and mortgage experts said that while the changes were steps in the right direction, the majority of first home buyers would remain locked out of the market because affordability and serviceability challenges remained.
EasyStreet mortgage broker Gareth Veale rising interest rates and a hike in the mortgage test rates were putting the squeeze on buyers.
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Often people had the required deposits through KiwiSaver, but were being turned down for a mortgage by the banks.
“It’s not all roses,” he said. “The stumbling block is serviceability - people being able to afford the loans or to prove to the bank that they can afford the loans. People can generally afford a mortgage but proving it to the bank is another story.”
Veale said that since the Budget announcements, buyers with less than a 20% deposit had been in touch and were feeling more hopeful about securing a home loan. However, only time would tell how many more people the changes would actually help.
“The grand thing has been put out there, but the banks and their implementation of it – we are sort of just waiting for that before we can do anything,” he said.
First Home Buyers Club director Lesley Harris says buyer incomes are still not high enough. Photo / Supplied
First Home Buyers Club director Lesley Harris said the Government had “cherry picked a few tweaks” to let a few more first home buyers through, but the outlook for most Kiwis was unlikely to change unless they went out and doubled their income or found an extra $50,000.
“We still have got this big problem of people’s incomes not being enough to get a mortgage,” she said.
A combined income of about $140,000 was now needed to secure a $600,000 mortgage, yet the average combined income in Auckland was still sitting at $94,000, she said.
“That’s a massive big gap so are we saying that we are only going to push solutions that are going to be for the top end of the income earners. We are not addressing that massive disparity.”
Harris said it would have been better if the Government had removed the caps completely so anyone who was a first home buyer could take advantage of the scheme.
“It’s still a bit of a catch 22 and only time will tell how many people are actually do end up taking up these things,” she said.
Umbrella Group mortgage adviser Sara Hartigan said next month’s expected changes to the Credit Contract and Consumer Finance Act would be a further boost for buyers.
She expected mortgage brokers would hear from the banks within the next few days about what the Budget meant, but said anyone wanting to be eligible for the 5% deposit should not just assume they would get it.
“It’s going to have to be a super clean application. So, no outside debt, no missed payment on anything - a really good credit score. We will be looking at bank statements to make sure they are not out to dinner every night or they are not having takeaways or Uber Eats.”
Valocity head of valuations James Wilson said the Budget announcements would not help everyone get a foot on the property ladder.
"There’s obviously a very large serviceability and affordability criteria they need to meet, so I don’t think it’s the magic bullet, but overall, anything to take away any obstacle is a good thing,” he said.
CoreLogic head of research Nick Goodall agreed that the changes might create a little bit of extra demand, but he didn’t think it would make a dramatic difference.
Other than house prices falling and a bigger investment in infrastructure to enable people to be able into certain areas close to town, he didn’t think there wasn’t much else that could be done to make it easier for people to buy their first homes.
While some first home buyers had dropped out of the market because they couldn’t get borrowing, others were just holding out for the right property as they weren’t as desperate to grab just anything, he said.
CoreLogic’s own data showed the new price caps for people to be eligible for the grants was still below the lower quartile of properties in some areas such as Christchurch so there still wouldn’t be that much choice available, he said.
