A surge in the number of first-home buyers getting a financial kick-start from the Government is a direct result of the house price caps in a number of regions changing as part of the Budget announcement, the agency behind it says.
The spike comes as a mortgage expert warned that first home buyers were still struggling to find homes within their price range.
Some 1865 homes were purchased between July and September 2022 using Kāinga Ora’s First Home Grant, up 11% from the same time last year and a 60% increase on the previous quarter.
Nationally, 2824 applications were approved for the grant during that same three-month period, up 34% on the same period last year.
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The increased help for Kiwis trying to get on the property ladder comes after the Government in May increased the amount someone could spend on a house in various parts of the region and still be eligible following heavy criticism that the previous price caps were out of touch with current house prices.
The First Home Grant provides each eligible first home buyer up to $5000 to put towards an existing home and $10,000 for a brand-new home.
The latest figures for quarter three published at the end of last year are a stark contrast from the figures for the start of 2022 when only 1149 applications for the First Home Grant were approved – a massive 60% drop from the same period in 2021.
In Auckland, 827 First Home Grant applications were approved between July and September 2022, up 98% compared to the same three-month period in 2021. A further 107 applications were approved in Tauranga up 613%, Hamilton jumped by 453% to 94 and there was a 67% increase in Wellington to 47.
The number of properties purchased in these regions also rose significantly.
However, Christchurch bucked the trend with the number of applications approved falling 25% to 312. There were also fewer properties purchased with the help of the grant also down 38% year-on-year.
Easy Street Mortgages director Gareth Veale: “You get someone an approval and they can’t do anything with it.” Photo / Supplied
Auckland first home buyers opted for a new-even split between existing homes and new builds, while those in Hamilton and Tauranga, Wellington and Christchurch largely favoured existing homes.
Kāinga Ora home and communities manager of home ownership products Jason Lovell said whether first home buyers buy new builds or existing properties comes down to what’s available in each region and individual buyer preference.
The aim of Kāinga Ora’s home ownership products such as the First Home Grant or First Home Loan is to help more whanau and individuals overcome the deposit barrier to purchasing their first home, he said.
The number of approvals for First Home Loan – a scheme allowing first home buyers to purchase a home with a 5% deposit - also shot up between July and September 2022 to 1505 compared to just 542 in the same 2021 period after the house price cap was completely removed and more people became eligible for the scheme.
However, the number of properties that actually settled is much less dramatic rising to 384 from 240 year-on-year.
Lovell put this down to there often being a time difference between approval and settlement as applicants process through the purchase process for their chosen home so a person who gets approval in one quarter may not settle on their house until a later quarter.
Easy Street Mortgages director Gareth Veale said that overall the changes had been positive and helped more people get on the property ladder especially with the property price cap being removed for First Home Loans.
Veale said one of the reasons why there were so many more approvals than actual properties purchased was people were still struggling to find a house within the limit the bank has approved them for.
“One of the guys in our office has got about 20 approvals sitting out there and has only had one go through to settlement. You get someone an approval and they can’t do anything with it. People are still having to make compromises.”
People are also being quite picky about what they get and trying to get absolute bargains, he said.
“I’ve seen clients in the first home situation in Christchurch who are just putting ridiculous offers on properties, but the properties are going for $100,000 more than what they have offered.”
Veale said the reason why more people in some regions have been approved or used the grants also reflects on how much the price cap in that area was lifted by.
The house price cap for First Home Grants in Christchurch only increased by $50,000, yet house prices in the region had continued to grow which is why fewer applications have been approved there.
“Unlike other areas, people are unable to find those bargains that fall within that cap amount.
“Just because $750,000 (for a new build in Christchurch) doesn’t really get you much and $550,000 (for an existing house) doesn’t really get you much to be honest either.”
The house price cap for First Home Grants is now $875,000 in the Auckland region for both existing and new build properties. Tauranga $800,000 for an existing property and $875,000 for a new build; Wellington is $750,000 for an existing property and $925,000 for a new build; and Hamilton’s cap is $650,000 for an existing property and $725,000 for a new build.
