Would-be first-home buyers made a last-minute dash last week to make an offer on a house before the government pulled the pin on its joint ownership scheme because it had run out of funding.
Kāinga Ora announced at the start of last week that it had nearly run out of the $194 million funding allocated for the First Home Partnership scheme and gave people who had been pre-approved only four days to submit a sales and purchase agreement for consideration.
During that time Kainga Ora received 84 sales and purchase agreements, which was a significant jump on the 50 received the week prior to the announcement, according to figures provided to OneRoof.
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Kāinga Ora is still assessing 132 sales and purchase agreements including the 84 received by 5pm last Thursday and is hoping to process them within 10 working days of receiving them. Agreements are assessed in order of them being received.
As of the beginning of this week, Kainga Ora had spent $117m helping to purchase 723 homes under the scheme and committed a further $55.17m on the 349 properties awaiting settlement. A further $21.4m has been set aside for the sales and purchase agreements currently being assessed.
Kāinga Ora homes and communities national services general manager Nick Maling says the agency is now assessing the 132 sales and purchase agreements it received before the cut-off at 5pm last Thursday. Photo / Supplied
Kāinga Ora homes and communities national services general manager Nick Maling said submitting a sales and purchase agreement did not automatically confirm approval. Kāinga Ora also needed to assess the suitability of the property as part of the standard First Home Partner due diligence process which included assessing the house size relative to the household and ensuring there were no significant maintenance or repairs required. Borrowers still must get approval from participating banks such as Kiwibank, Westpac, BNZ and SBS who have their own lending criteria.
The agency announced at the end of September that the scheme was oversubscribed due to a surge in demand and would not be accepting any more applications. However, those who had already applied and been deemed eligible were still able to go ahead and look for a house.
The shared ownership scheme was announced in October 2021 and enables first-home buyers to purchase a majority share in a new home with Kāinga Ora owning the minority share and listed on the property title as the co-owner.
It was aimed at Kiwis who have a low deposit or could not service a bigger loan. Applicants needed to have a deposit of at least 5% and have bank approval to be eligible. Kāinga Ora would then buy up to 25% of the home, or $200,000, whichever was lower.
Under the scheme, the Government has contributed an average of $160,760 towards a house that has an average value of $811,054,00, according to figures provided by Kāinga Ora based on settled sales up to the end of October 2023.
Mortgage Managers mortgage adviser Stuart Wills, who runs a popular first-home buyers Facebook page, said some of the applicants were “panic stations” after learning they only had a few days to buy something before the First Home Partner scheme closed at 5pm last Thursday. His company had four clients contact them in a panic wanting to get something over the line before the funding was cut off.
“There was a bit of urgency in there and people making some dumb decisions to be honest, but that’s just the way it happens.
“They just thought ‘s***, I’ve got to find a house so we will just go and find a house that might be ok’. But you are not going to do your due diligence on a house within a couple of days so they are either going to pay too much for it or buy a house that might have had some issues or something.”
Squirrel Mortgages founder John Bolton said for some people the First Home Partner scheme was the only way they could own a home. Photo / Supplied
Squirrel Mortgages founder John Bolton said for a lot of people, First Home Partner was the only hope they had of owning a home and now that option had gone.
He said most people wanted to own their house in its entirety, so people only used the First Home Partner scheme because they had no other choice.
“These people would have been thinking ‘oh s***’, they either use it or lose it’ ... will they regret it? Well, not really because they were going to lose an option that was really their only option. If Kāinga Ora comes back and ‘goes we’ve got another $100m now’ – maybe then they would, but you can only deal with the cards that are in front of you.”
Some 76% of buyers who purchased houses using the First Home Partner scheme were in Auckland, which Kāinga Ora said could be due to its high population and volume of new residential developments; whereas about 7% of people in Canterbury and Wellington had used the scheme and about 4% in Waikato and elsewhere.
However, Bolton believed the reason the majority of First Home Loans were used to buy houses in Auckland was because of the cost of the houses relative to people’s incomes.
“That’s why you see much of the shared equity stuff in Auckland because that’s where the real affordability issue is for first-home buyers. Out in the provinces they generally have enough income relative to where house prices are that they can get in with a small deposit through the First Home Loan scheme or even directly through the bank if they have a big enough deposit.”
Harcourts salesperson Alex Dunn, who sells in South Auckland, said he had expected to see a rush in first-home buyers, they had been working with, suddenly wanting to buy before the scheme closed last week but it never eventuated. “No one was in a hurry to do anything.”
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