The developer of a new South Auckland neighbourhood is subsidising first-home buyers’ interest rates so that they effectively pay only 3.95% for their first two years of ownership.
That’s a huge 2.55% saving on current bank rates. The last time interest rates for two-year terms were below 4% was in November 2021, figures show.
The Wirihana development has just launched the first three blocks of houses in Wiri, near Manukau City, that will settle between July and September this year.
The interest subsidy for the first two years of ownership aims to overcome one of the key barriers to first-home ownership, said Dan Bell, chief customer officer of Squirrel Mortgages which helped design the scheme with developers, iwi Te Ākitai Waiohua, their partners Avant Group and real estate agency Colliers, which is marketing the development.
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“It made logical sense to do this when interest rates are so high, it’s a challenging time with cost of living, and a lack of confidence in this first-home buyer segment,” Bell said.
“We really like to help first-home buyers, we’re very strong with them and have an approachable brand, it’s a simple online application.”
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Bell said that while borrowers will be paying standard bank interest rates for their two-year loan – currently at 6.5% – the programme will subsidise 2.55% of that.
"This is not an actual mortgage rate. The developer is paying the effective difference between the current mortgage rate and 3.95%. We top up [the buyers’ bank account] with the difference.”
He said that means buyers of a $650,000 home with a 5% deposit and a mortgage of $617,500 are saving around $30,492 on the first two years of their mortgage – nearly $1270 a month."
The 11-hectare Wirihana development on former hospital land will eventually have over 400 new homes. Photo / supplied
Wirihana is a master-planned community based on a restored Puhinui stream and wetlands. Photo / supplied
While this mortgage subsidy is a first for New Zealand, Bell said that he has seen examples in North America, often in regenerating neighbourhoods.
“The developers had approached us. They’re funding it, but we could provide the solution through Squirrel Mortgages and Squirrel Money, working with the mainstream banks.”
He added that, as with all mortgage applications, banks would still stress-test borrowers to the standard 8.5% to ensure they can afford a regular mortgage in the future.
“The developer didn’t want to discount the price of the homes because that affects their valuation for buyers later on.”
The first three lots of homes, a mix of two- to four-bedroom standalone, terrace and duplex houses, are part of a development that will eventually have over 400 new homes, centred on a rehabilitated Puhinui stream. The neighbourhood name, Wirihana, recognises Te Ākitai Waiohua's chief, Te Wirihana.
The affordable neighbourhood will eventually include a daycare, café, community gardens and hub. Photo / Supplied
Recreation includes an outdoor gym, a half-court basketball court and nature walks. Photo / Supplied
The 11-hectare master-planned neighbourhood near Manukau city is built on land owned by the Ministry of Housing and Urban Development, and is part of the Land for Housing programme. It was formerly tagged for expansion of the Counties Manukau Health super clinic, but the government released it for housing back in 2016.
Pete Evans, national director of residential project marketing at Colliers, said that since the master-planning of the development started back in 2017, the mandate was to provide affordable housing solutions.
“It has a non-traditional finance model because of the participation of each party, the combination of all of them looking at flexible ways of developing and how to assist in a volatile market,” Evans said, adding that prices for the new homes are some $100,000 below KiwiBuild price caps.
“This finance offer was thought about over six months ago. We asked ‘what are the scariest, most difficult parts to finding a house?’.
“One, it’s the deposit – so this is low at 5%.
House prices start at $650,000 through to $950,000 for a four-bedroom standalone home. Photo / Supplied
Top architects have designed the neighbourhood to a high standard. Photo / Supplied
“And two is the repayments, so we went ‘what if there is a fixed rate of under 4%?’. Squirrel suggested two years, as interest rates are hurting this year and next year and then may come back. They had a whole range of banks involved so it could be sustainable over time.
“It means for the first couple of years [buyers] can live a better lifestyle than if they were paying 6.5%.”
“The demand for quality housing still exists,” Evans says. “The Wirihana offer removes buyer uncertainty [of finance] and creates an affordable home with affordable finance.”
Prices start at $650,000 for a two-bedroom terrace, $725,000 to $850,000 for three-bedroom homes and $950,000 for a four-bedroom standalone. Some are by well-known TV architect Ken Crosson, others by Brewer Davidson and Sills van Bohemen Architects.
“You never see a row of the same houses, the designs change, they’re all in neighbourhoods,” Evans said.
The neighbourhood, master-planned by Isthmus, will eventually include a daycare, café, neighbourhood hub and community gardens, along with outdoor gym, half-court basketball, play spaces and board walks around the restored wetlands.
Evans said Avant Group and Te Ākitai Waiohua recently completed Kōtuitui, a development of some 80 homes also in Manukau, which received several high-profile industry awards.
The first Wirihana properties were launched to the KiwiBuild database on Friday, with more information being rolled out this week.
- Click here to see more homes for sale in Wiri
