New package to help about 90,000 lower and middle income first home buyers over the next five years, says Nick Smith

New package to help about 90,000 lower and middle income first home buyers over the next five years, says Nick Smith

Content supplied by the National Party

The Government is doubling support for first home buyers to help tens of thousands more young New Zealanders into home ownership and encourage the building of more affordable new homes, Housing Minister Dr Nick Smith says.

“This new package will help about 90,000 lower and middle income first home buyers over the next five years. It will ensure more New Zealanders are able to attain the dream of owning their own home, giving families greater security and building stronger communities,” Dr Smith says.

The package comprises three changes:

  • Replacing the KiwiSaver First Home Deposit Subsidy with a KiwiSaver HomeStart Grant, doubling the support for buying a new home and increasing the house price limits;
  • Enabling larger KiwiSaver First Home Withdrawals by including the member’s tax credit (meaning first home buyers will now be able to withdraw all of their KiwiSaver savings except the $1000 kick-start);
  • Expanding eligibility for Welcome Home Loans by aligning the house price caps with the new KiwiSaver HomeStart Grant.

“We are roughly doubling the number of people receiving a Government grant to buy a first home from 10,000 per year to 20,000 per year, and doubling the Government grant they are eligible for if buying a newly-built home,” Dr Smith says.

“The focus of this package is to increase the supply of new housing and to encourage housing companies to build homes in a price range affordable for first home buyers.

“The house price limits for KiwiSaver HomeStart and Welcome Home Loans will be $550,000 in Auckland, $450,000 in Wellington, Christchurch and other similarly-priced housing markets, and $350,000 for the rest of the country.”

Currently, first home buyers are eligible for a grant of $3000 after three years in KiwiSaver, $4000 after four years and $5000 after five years. Under KiwiSaver HomeStart, this grant will double to $6000 after three years, $8000 after four years and $10,000 after five years for the purchase of a newly-built home.

The changes to the KiwiSaver First Home Withdrawal in enabling access to the member’s tax credit will increase the maximum withdrawal amount by $512 per year for each year a member has contributed.

The KiwiSaver First Home Withdrawal is limited to members buying a first home, who have been contributing for a minimum of three years. The KiwiSaver HomeStart Grant and Welcome Home Loans have additional criteria of people having an income below $80,000 for an individual and $120,000 for a couple, and the house being purchased must be below the regional house price limits.

“This new package extends the help for all first home buyers who are in KiwiSaver although the amount of extra help depends on the amount they earn, the number of years they have contributed, and whether the house they are buying is new and whether it is within the regional house price caps. The support is targeted to people on modest incomes buying modest homes,” Dr Smith says.

“The package means a couple in Auckland each earning $50,000 who have contributed to KiwiSaver for five years will be able to withdraw $35,000 and receive a $20,000 KiwiSaver HomeStart Grant, giving them a $55,000 deposit on a new home. With the Welcome Home Loan scheme allowing only a 10 per cent deposit, they will be able to buy a home up to $550,000 in value.

“Home ownership has been in decline since the mid-1980s and census data shows the greatest decline amongst 20-to 35-year-olds. This package is targeted to help this group and enable them to get on to the housing ladder earlier. Two-thirds of the group expected to benefit from KiwiSaver HomeStart are in this age bracket.

“This is the most significant Government support for first home buyers in more than a generation and will come into effect on 1 April 2015. KiwiSaver HomeStart will cost an additional $218 million over the next five years.”

The additional expenses incurred in 2014/15 will be a charge against the between Budget contingency established as part of Budget 2014. The additional expenses incurred in 2015/16 and later years will be a pre-commitment against Budget 2015.

“KiwiSaver HomeStart complements our work that is freeing up more land supply, reducing building material costs, reining in infrastructure and compliance costs and investing in sector skills and productivity,” Dr Smith concluded.

Here is the Labour Party response:

National applies band-aid to housing crisis

The Government’s flagship housing announcement is a band-aid approach that will push up prices rather than solve the housing crisis, says Labour Leader David Cunliffe.

“House sales to first home buyers have collapsed as a direct result of the Government’s failed housing policies, and now they are offering up a sticking plaster.

“If this is the best they can come up with after six years of denial and delay, they don’t deserve to be in government.

“They refuse to actually build the many thousands of extra houses that are needed. And they refuse to tax speculators.

“All they are offering is some help with a deposit for a few thousand extra home buyers, and letting people borrow their own retirement savings, when tens of thousands of Kiwi families are afflicted by the housing crisis.

“That will not even offset the higher deposit requirements under this government’s loan to value ratios (LVRs).

“The fundamental problems are lack of supply of housing, planning rules that constrict development, and unrestricted speculation.

“Unmet demand is driving house prices through the roof, and instead of addressing the fundamental problem now National wants to spend $218 million of  taxpayers’ money to fuel demand even more. It will drive prices even higher.

“Labour will fix the housing crisis by building 100,000 affordable homes for first home buyers. Labour will also remove the current tax preference for speculators, and issue a National Policy Statement under the RMA directing Councils to increase the supply of new housing,” said David Cunliffe.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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Watch Kiwisaver funds being used more and more for such political purposes, in the future. They are free game in this political rugby and the game is here to stay.

This is a good use of kiwis saver funds. Part of them has come out of wages after all and therefore belongs to the wage earner. In this low wage economy this is the only way many will be able to get on the home ownership ladder. It has to be a good thing.

Because of the underlying dysfunctional system, all that will happen is any benefit that a first home buyer should get will be captured by the likes of land bankers, developers and council prior.

All it means is that prices will increase to absorb any benefit so as to give the same ratio as we have at present, just as cheaper interest rates have done.

Both homeowners hard earnt savings and taxpayer money will in effect be transferred to new home developers and existing property owners.

It's not that this ability to capitalize Kiwisaver and receive a Govt. subsidy, or lower interest rates are bad in themselves, but are totally wasted in in this FIRE environment.

Which obviously leads to the theme song for this latest Government initiative:

 https://www.youtube.com/watch?v=VpdHMaccjw4  

My first thoughts, too, Dale.  More $ on them limits = more incentive for builders to build to that exact dollar figure.  That is precisely what happened when Labour introduced the Welcome Home stuff back in the day:  suddenly all house prices leaped up to, spooky possums, that exact figure.  It's arguable that this started off the whole awful housing price ratchet effect.....
 
ECON101, really, eh.

Not one extra house will be built in Auckland based on this bribery.
My question would be. Once you have your $55,000 and get your house, how do you pay the mortgage when interest rates get to the predicted 8% sooner rather than later?
It will only hold up the prices in the market generally. Not any attempt to make housing any more affordable. 
 

Really? It seems Fletchers are gearing up substantially to build three times as many new home in Auckland alone, per year. Most of their competitors will be doing the same.
 
The critics might be better off worrying about the inflationary effects of all this impending activity. There will be distortions, lots of them. But one thing is for sure, there will be lots of new houses built (no matter who forms the new government).
 
I think this will be a good thing - but only so long as it goes on for a number of years - at least seven. All that new capacity will depress prices for existing homes in many areas (although maybe not in central Auckland). With falling - or even stable - house prices, then you will really hear the whiners (mostly BBers).
 
Don't count on future capital gains on the family home.

So there isnt much land shortage then?
Also Im not so sure its a worry on the family home as the future lack of gains the speculators expect taht be a bigger effect?
regards

No, there is no land shortgage. Only regulation impediments. Up and out are both needed in Auckland. Out in other centres. Labour's policies set the aspiration, National's the how-to. (Green's the impediments ?) But councils need to adopt and adapt.

David new homes only depress the price of existing homes if they are cheaper or at least better value for money than the existing homes.
 
If the many layers of ticket clipping costs at every level for new builds from the FIRE industry is not reformed away then to expect this new supply to depress prices is not the economic orrthodoxy of supply and demand.
 
If New Zealand genuinely reforms its home building industry expect the competiton to come from the second tier in demand urban areas. Tauranga, Christchurch, Wanaka, Hamilton because they are areas with plenty of land within close proximity of in demand urban areas.
 
Auckland is always going to be more expensive because it already has built out 30km in most directions.
 
The sham of the governments housing reforms is that it has not allowed those second tier areas to get into the game.

Plus your Fletchers link shows the new Housing Chief building experience is all from London the centre of the completely dysfunctional English housing market. I doubt he has any useful insight other than how Fletchers can add landbanking into its skillset.

Fair enough. You could be right regarding the relevance of UK experience. But the really big landbanking is by BBers. They are the ones sitting on 10 acre blocks outside the urban-rural boundary, just waiting for it to break. Do it all at once and those values dissolve.

I agree with you there David. 170,000 lifestyle blocks ring our urban centres. These are ultra low density housing for the rich. The well off can afford to buy 10 acres at rural land prices so they get cheap land while the less well off cannot afford to buy 10 acres they get forced into a fraction of an acre in overpriced residential zoned land that is almost as expensive as 10 acres in the country.
 
If we all had the right to build at normal housing densities on lifestyle blocks. Say if they met standards to be considered 'eco-villages' this rort would be finished overnight. I have written to our left wing parties suggesting exactly that.

Hugh Pavletich argued that " lifestyle " blocks take up 4 times the land area of all our urban centres ...
 
... there is no land shortage ...
 
As DC says , just a zillion impediments placed infront of developers by local councils ...
 
... and hence it's not so much that house prices are over the top , but that the section prices are astronomically high ..

Agree with the above. Only forcing councils to free up land will solve the affordibility issue. Cheap housing is pointless if land prices are still through the roof. Of course this means making the hard decision of undoing the balance sheets, as DC stated, of both property holders and the banking industry, which it is clear the government is avoiding.

Gummy, do you know the source Hugh used when he made that statemnet?
thanks

what is your source for 170,000 lifestyle blocks?

Us BBers did it's hard. We did not earn any thing near the wages/salaries you can earn today. And our parents could not help us financially like the spoilt kids today. We saved but very few do today hence a lot of the houses bought today are financed mainly from kiwisaver.

Haha - any links or refs to studies or just your own personal experience G?
Can you promise me that I will have a pension I'm 65?

Probably not - but hey, when we have to deal with the debt they left us with, we can let them eat their houses.

Retired and nearly 59 and I don't think I will get it at 65 either. The western world economies are just one big bubble pumped up on debt. Be careful out there.

Is that why there were so many small businesses and small farms?  such things aren't even feasible now.   Always a bonus for for being in at the beginning..

Haha, "sure" you did mate.
It's not the absolute value of our income but the ratio - I'd love to have bought a house at only 2-3 times annual wage bro!
And where are these rumoured parents helping out their kids financially? Me & everyone in my circle of friends have no-one but ourselves, but keep telling yourself we can't save and we're spoilt.
And I'd like to point out that I'm sitting on 150k in savings, but at current prices I'm priced out of the market pretty much unless I care to bring up children in Otara - even a "decent" salary of 130k/year is pretty much poverty level if you want to buy a house.

Have now added the Labour Party response into the story above.

... how can they possibly hope to build 100 000 " affordable " homes , when average section prices are $ 200 000 and up ... it'd have to be shoddy materials and construction to get the whole package under $ 350 000 ...
 
And if you look at the  house price multiple to household incomes in NZ , even this is wildly unaffordiable ...

My understanding is they intend to build on Crown and LA-owned land.

Which means the taxpayer and ratepayers take the losses on the land? (Is that Labour socialising the losses to protect the private sector?)

What makes you think they will be taking losses? Perhaps based on the CVs on the land value - but in no way was all of that land paid for/purchased at today's market rates. Much, I assume has been in Crown ownership for years and years and years. Take the Hobsonville land, for example.

Kate, eitherway it has a market value and is owned by the tax payer - unless that average value is something well less than $100,000 then what they're talking of is a potentially very large transfer of tax payer wealth to first home buyers - a gift.

What would the market value of farmland the government bought say tomorrow and at a stroke of the pen rezoned residential? Would it be farmland prices or residential land prices? If a NZ government really wanted to build $350,000 houses getting cheap sections is not the problem.....

Agree.

Create the problem, then offer the solution. Govt. owned Hobsonville land sold to home owners via developer for $1,400,000 ha. Then they take some of that profit and give it back to you as a subsidy rather than just sell it to you for its rural land value of $50,000 ha.
There is a heap of money to be captured from the raw/rural land price to the end user/homeowner. Govt. have a fiscal duty to fight on behalf of all ratepayers so as to capture as much as the market will bear, otherwise the developers would get it instead. It is a fight between the multiple parasites to take as much as possible without killing the host, and it is amazing how much the poor FHB will take as a roof over our heads is one of life’s basics.

It would be nice if the government used its powers to be a moderating force on the property market rather than joining the other players in driving it ever upwards.....
 
I don't care if that moderating force comes from giving a 'right to build' to private individuals on say lifestyle blocks or it becomes directly involved in building houses on rural priced land -$50,000 a hectare not $1.4million.
 
Or maybe some combination of both.
 
I was reading about Atlanta private railways getting into the realestate game because sub-divsions around passenger train stations went up in value 25%.
 
Perhaps in NZ one solution is we give Kiwirail the right to build.....
 
Maybe Kiwirail should talk to Kiwibuild....
 

Exactly regards the land value at Hobsonville. Knock out the developer - government does it as government and neither do they take any markup on the materials and build costs. So, a bunch of homes get built and sold at cost to genuine FHBs.
 
Why does everyone seem to think this is so hard? Successive governments did it on a massive scale back in the 40s right through to the 60s. I know plenty of capable builders in their late 50s and early 60s who would gladly take a regular pay cheque from the government to manage crews and train up apprentices at the same time. They'd just LOVE to take a salary after years and years of being small builder/business owners and subbies who don't get paid on time (if ever).

The reason why they won't do this Kate is because they have to prop up the price of land so it doesn't cause other land to fall in value, other land that is owned by voters.
Best to artificial prop up land and then give some of it back as a subsidy. If the land is 100% dearer than it needs to be and they only have to give say 10% back as a subsidy to keep the charade up, then everyone is happy in their misery. 
This game is complicite by all political parties as it is the oil of the NZ economy, and that is why you never hear anything different from any of the parties on this, and that they have no understanding or idea on what to really do.

Not sure why the government cares what the book value of their land holdings are?
As for it being the oil of the NZ economy I think grease is a more accurate term.....

That's just a scare tactic argument often posed by the right.
 
I don't think there would be significant falls in land values overall but neither would there be the kinds of gains we've seen since early to mid 2004 and onwards - thus cooling inflationary pressure. Satisfying the existing market of FHBs in Auckland, for example, would also mean that some pressure would go off rentals (and rents might ease), expectations of gains in the low end would be diminished, I agree - but the location/location areas would still command high prices and (provided there are no restrictions placed on non-resident owners) they might even keep rising at pace. If they want to cool the high end as well - then place the restrictions on non-resident buyers, as that will deter resident speculators as well.
 
Hopefully too, the large scale building of single dwelling properties will boost employment and provide opportunities for lots of apprenticeships.
 
You can build one heck of a lot of houses with just the money projected to be spent on Transmission Gully (i.e., just one of the RONS).
 
Point I'd make is that the Labour plan is do-able provided they can find the workforce - and that relies heavily on training up young locals. 

On that basis then Kate, I was ripped off by the Govt with the price I paid for my MRP shares. They should have sold that 49% to us NZ investors at the price it cost them to build the infrastructure many decades ago.

Maybe you were....... I hope new competition for your sake Grant can't build new generation like our oldtimers did.....

I was quite comfortable with it before Brendon, but following Kate's explanation as to how selective NZers should be gifted taxpayer assets, I'm gutted. 

Certainly was in my opinion - as I mentioned prior to the IPOs the SOE energy outfits were not fit for purpose when they were hived off to mum and dad investors (maybe not). Read more

And the Govt gets no thanks from the public Stephen :-). Govt does know best

Yes. Agree.

I suppose in principle the die is cast :
 
Shell out $265,000 and collect more than $10 million. It's one of several nice little high-country earners.
 
Lincoln University academic and tenure-review expert Dr Ann Brower has for several years been following the money trail from the Crown's coffers to the bank accounts of high-country farmers.
 
Brower says that in 2002, the Crown sold 3365 of the 4579-hectare station to leaseholders Don and Vicki McRae for $267,500, the equivalent of $79.50 per ha.
 
The Crown then bought pastoral leasehold rights for grazing and conservation of the remaining 1214ha - higher-altitude land - for $202,500, or $166.83 per ha.
 
She says the McRaes then subdivided the newly freeholded land and sold just 193ha of it to Damper Bay Estates in October 2006 for $10.1 million, according to Quotable Value data.
 
"That's 658 times what they paid. Translated into urban terms, this is like selling a section for $100,000 then seeing it sold on for $65.8m four years later." Read more
 

The likes of the McRaes should be stripped of their dirty gains and do some prison time along with the collaborators in the local councils ( probably their family or friends in the cosy farming community ). And the bureaucrats who handed them the govt land should have their careers destroyed.

That is what is happening in China. This sort of behaviour would be labelled corruption and long prison sentences have been the result......  Of course now many of the corrupt are trying to exit China with ill-gottern gains to invest in property elsewhere. Perhaps their experiences allow them to recognise which markets are rigged.....

I'm sorry, but this policy is misguided and actually economically dangerous.  NZ house prices are recognised as in a bubble by all the main economic institutions.  You don't ease pressure on a bubble by fuelling demand.  National should know better.  They need to take steps to reduce demand and increase supply, otherwise household mortgage debt will spiral up from its current dangerous levels and increase the risk of NZ entering economic crisis down track.
And given NZers (as a country) have nearly all of their wealth and savings tied up in property, why would you promote them taking one of their only savings diversifiers and putting this egg into the same basket?  No qualified financial planner would ever recommend committing all your wealth into one bet (and then levering it!) so why would our Government?
And What do we expect the RBNZ to do in resonse to a policy designed to fuel housing demand (and hence asset price inflation)?  This policy backs Wheeler further into a corner where he will have to raise interest rates to reduce housing demand, which will hit every house owner in NZ.  It just makes no sense.  
On the economic de-merits of Governents directly encouraging house purchasing, people should read Adam Posen's great article in the FT from last year, where he despaired at the UK government doing similar things through their "Help to Buy" scheme (link below).  Governments should not incent people to buy housing, we have just dodged a global depression bullet caused precisely by rampant property speculation and mortgage borrowing, and we don't want to go back there anytime soon.
http://www.ft.com/intl/cms/s/0/00bf5968-f518-11e2-b4f8-00144feabdc0.html...
 

Mr Bear , you are so right , brother .... we have the overwhelming majority of our net worth tied up in residential houses , and in dairy farms ...
 
... a smaller % is in productive businesses ...
 
Why encourage more munny to flow into houses , indeed !
 
... as DC says , a change on zoning laws would scuttle future capital gains , as section prices could collapse , and bring house packages into a far more affordable and sustainable price range ... just in time for Labour's CGT to backfire on them , as " speculators " claim losses off the taxpayer , instead of IRD creaming profits off the " speculators " ... fools if Cunny & Co. think CGT is  a sure bet to make munny for the Gumnut ...

Indeed, GBH, if Councils could discover their vertebrae, they could turn this around as soon as the next LTP:

  • chuck away the zoning (as Brendon notes, echoing Hugh P, it simply squeezes the outlet into the surrounding lifesytle blocks.  That's certainly the case here in Christchurch - South Eyre Road on the north bank of the Waimak is wall-to-wall life-sentence blocks....) and use the German 'Right to Build' philosophy.
  • Implement swingeing rate differentials on buildable but bare land within their boundaries, to incentivise the land bankers to Do Something.  This is a sort of CGT, and one would hope that the Councils would apply the proceeds to firstly superannuate the myriads of Planners ejected as a result of #1 above, and secondly to ease the path for the aforesaid FHB's.

However, as Councils (generalising wildly), are just not that great at actual Public Policy, and upon X-ray may prove to be indeed back-bone challenged, I seriously doubt that either will come to pass.

Didn't the Australian government do something similar 5 years ago? Hasn't this misguided policy actually demonstrably failed recently, nearby, and in an identical context?

This government is extraordinarily keen on enacting expensive failed policies from overseas.  This one (failed in UK as well), the drug testing for welfare idiocy, combining small and effective government agencies into bloated, inefficient behemoths ... who knows what else.
It's not supposed to be effective.  Just a load of propaganda and theatre.

Ah... exactly. And here was I thinking I might put my rental on the market (silly me), as we must be nearing a peak this run, but if the government is going to support these prices they have in effect countered the LVR effect on first home buyers, so maybe the bubble that is Auckland just might go on for a bit yet.
 
My only hope for those lucky FHBers is that they do not face some sort of black swan event, like a major Israeli attack on Iran. Iran then shuts down the straights of hormuz sending oil prices skyrocketing, inflation ignites (opps we really did print too much), and interest rates are forced up (welcome to the GFC Mark II where interest rates actually go up to double digits).
 
Oh well its all fun and games when you are trying to win an election.

Another disgraceful policy that will hurt the people it's marketed as helping.  The subsidies plus the further leveage they enable will flow straight into the pockets of who?  Asset prices will just increase to compensate and a new price floor will be set at the increased threshold.  It makes me sick that gullible young kiwis don't see this for what it really is.

The National 'plan' is just an attempt to disguise the status quo - a dressed up version of business as usual.  They screwed Dunedinites in much the same way - kicked in $10m on a covered stadium to enable the local borrowing to commence.
 
 

Good anology re continuing the status quo of borrowing too much and good comparison with Dunedin's white elephant covered stadium.

they had to cover it, too many locals were using the Scottish Stadium

Waky, waky, its election time.
Sky City anounce just before the election a big suprise They are to build a big new hotel creating lots of jobs and now Fletchers come out with their big promises.
 
I am not voting based upon stories just before an election. Action speaks louder than words. Where is the action?
 
Remember its bullshit time
 

Aw, puhlease. This has only one purpose: keep prices high.
What a waste.

Using the example two people, $50k each, w/ 35k in savings.... top price 550k.

why are they receive 20k in inflation bidding bonus?  - they make 100grand a year

If you look at these grants plus kiwisaver as a % of house price you'll see this will effect lower priced regions far greater. Without even saving you can now get to the 10% dep level for a 350k house, possibly a brand new house, without saving, for your first home. All the complaining in auckland has led to easy times for FHBs elsewhere, provided they have had a job and been in kiwisaver for a while. There is always a tendency to buy at the max level the bank says you afford, to try out do ya peers, and this is just more fuel to the fire. If this doesn't get house prices moving in the regions I don't know what will. Also, my understanding is that you can grow kiwisaver for as long as you like before withdrawing for a first home purchase? As the years go by, people in their 40s will have 100k-200k plus in kiwisaver, and be able to buy a mill plus home for their first, but then find themselves out of pocket come retirement time, with all their money in a property which may be a money pit depending on what they purchase. Interesting policy, seems pretty generous to FHBs, and pretty clever in that people smart enough to understand the property market who are in the market are happy as their properties values get underpinned, and people out of the market are happy as they think they are getting a bonus that their peers who have already brought have missed out on. The interest.co.nz reader maybe the minority who are cynical enough to see through it all..

Exactly this policy increases property price, hardly supply in Auckland.
A failed policy with no direction that well assist a few.
Again National tinkering and continue to kick the problem down the road.

"lower priced regions" don't have 10% deposit requirements.  They have minimum 15 -25% deposits.   And what do you mean "without saving?"

welcome home loan under 350k at 10%.
without saving as in sign up to kiwisaver and contribute minimum for 5 years plus get the grant and you have your 10% dep of 35k for a couple without savings in addition to kiwisaver.

until you apply for the mortgage and you will be told that in regions you need more than 10% deposit.  (and small towns/rural it can be up to 25%)

How did John Key ever get so rich? His interview on Morning Report was ludicrous.
 
Since when did orthodox economics get rewritten so that residential housing is classed as an economic investment. It was under the "C"[onsumption] column the last time I looked.
 
The predicted deflation of building expectations has now officially occurred. The promised 39,000 houses in Auckland that turned rapidly into 39,000 building consents has now turned into resource consents that may or may not tot up to 39,000 dwellings one day.
 
But I saved the belly laugh for the confident assertion that there is a legion of developer/builders out there waiting to plunk cheapy starter homes on $250-$300K sections. 
 
Get those idiots out of here....please.

Q: Can you withdraw kiwisaver for a house over these price caps levels? I have been reading HNZ website and it is not clear that kiwisaver withdrawal for first home needs the house to be under the price cap or not. Its clear for the grants and welcome home that house needs to be under the price caps, but not so clear for the kiwisaver withdrawals (hence the danger of having 40-50 year olds spend their retirement savings on million dollar properties and have nothing left for retirement).

Two points on this:
1) Say a single person earning $80k buys the most expensive house they can at $550,000.  After their $55,000 deposit they are left with a mortgage of $495,000.  For the sake of argument, let's say they can borrow at 6.00% (for now anyway).
Their after tax pay will be around $62,000, while their mortgage payments over a normal 30 year loan will be $30,000.  So effectively 50% of their in-the-hand earnings is spent on servicing the loan.  
This leaves $32,000 for rates (say $2,000 pa) and insurance (say another $2,000); so their net is in fact closer to $28,000 pa.  That's equivalent to $540 per week of 'disposable income' to cover all other living costs.  And that's before any further increases in interest rates or taking into consideration the fact that they would be caught by the High LVR restrictions because they are within the >80% LVR bracket.  
Should rates rise to 8.00% then their disposable income reduces to $280 per week.  You don't have to be a mathematician to realise that that's not an attractive position to be in...
2) The KiwiSaver HomeStart Grant for new homes is twice the amount for an existing house up to $20,000 for a couple.  What a joke that is!  The GST that the Govt collects on new homes is so much more.  If they were really committed to it, they would scrap GST for first home buyers on new builds.  But we all know that's never going to happen.

And you are assuming interest only loan there too (i.e no principle to pay off).  Banks likely to want 20 year term or max 30 year term.  Which for a loan of 495k would be 150 plus a week in extra priniciple repayments (which can be thought of as forced savings as it increases owners equity), but still tightens the strings that much further on the disposible income... $390 with principle included.
 
Water bill, power bill, internet.  Might be possible for a couple living together, but no way a family with kids would risk doing anything like this, or get the loan approved by the bank in the first place.
 
As for regions, 350k for a new build, or 5 bedroom 150 sqm house with pool on 800 sqm section second hand house, entirely affordable for someone on 80k with 55k dep, esp when transport costs and all the other hidden expenses of living in a big city fall out.

National may have lost my vote with this one. It has been shown all round the world that all demand-side policies like this do is push up house prices. (e.g., http://www.greaterfool.ca/2014/08/22/who-can-you-trust-2/ ). I thought Nick Smith was more evidence-driven than this pathetic piece of vote buying.

If National were a rugby team and Key, Joyce, Collins, Brownlee the tight five - in sheer mass if not numbers - then Nick Smith would be an excitable eight year-old ball boy allowed to bring the match ball out at the start of the game. His opinion does not count for anything in that caucus; shame given that he actually has some brains.

Agree completely. May have to hold my nose and vote L/G so that there is a shake up at the top of National. Not excited about voting to raise my taxes by doing so though!

I'm sorry Kumbel but comparing Nick Smith to an excitable eight year old ball ball is very insulting - to the ball boy.

It's true that eight year-old boys don't have as many tantrums as Dr Smith. I stand corrected.
 
Perhaps he is the rabid fan ejected by police for disorderly conduct.

Why on Earth is a retirement savings scheme being used to subsidise housing for first home buyers?! This is a travesty of a scheme for so many reasons, whoever decided on this should have their head read

One of the only ways I can figger to halt this sorta rort (Gubmint assistance falling through the layers to end up in the outstretched hands of Carters, Fletchers and land-bankers), is to flood the market with:

  • cheap, multi-proof-consent factory-produced builds (so as to keep build consents away from the ineptocrats at Councils).  Factory builds work overseas for everything, they work here for boats, caravans and Portacoms, so it's not a stretch to go to Houses.
  • Greenfields, outside MUL/RUB boundaries, to end-run the economically clueless Plannerz and their land-value-multiplying ratchet effects.  It would take a Benevolent Buyer, however, and (pun intended) there's the rub....
  • MUD-style approach to funding and building infrastructure.  There's not actually a lot to throwing together a new subdivision (I earthmoved one or two, back in the day, with shall we say some collateral damage) and it is certainly an area where sweat equity is possible.  (look around at the types who excavate, lay K&C, grade roads and the like and ask yerself - how many hours training is needed for much of this?).
  • Some R&D to support those factory builds:  e.g. in a country where there's a Wall O'Wood comin' at us, it must shurely be possible to devise a Kingspan type panel system (blown foam in an OSB sandwich) which is cheaper and quicker yet which don't violate patents or IP.

What else is needed?

Aside from the MUDs idea, I think this is pretty much Labour's Kiwibuild proposal.

Actually Phil Twyford is on record supporting a version of a MUD in a Parliamentry select committee discussing that housing affordability was in crisis and all options need to be pursued. National did not pursue it...
 
Labour need to be front footing the housing issue so the public knows where it stands.

My toughts as a young immigrant in New Zealand who doesn't own a property and doesn't want to enter an overpriced market:

  • Kiwisaver is a voluntary saving personal schema conceived for retirement. I don't understand why are we allowed to use these funds for something that it's not a need, like purchasing a house. Everybody needs to live somewhere and should have the right of having a shelter, but there is not such a thing as the right of owning it.
  • The funds in Kiwisaver are not only coming through the person's generated work income. It also comes from the employer and from ALL the taxpayers due to the government tax credits and contributions. Hence all the taxpayers are contributing on individuals' ownership, which it's unfair.
  • We have a currently overpriced housing market. Through this "everybody's contributions" we all are accomplices of increasing this madness. So instead allowing individuals to decide whether they want to enter an overpriced market and allowing the conditions for a fair trade based on offer and demand, the government encourages debt and risk with everybody's money.
  • This is not really helping first home buyers. This is helping banks through encouraging credit, and speculators through distortions in the market that prevents prices from going up or down freely.

Next weekend I'll be able to participate for first time in the NZ's elections and contribute to decide our future. I am shocked that not only the party that rules the country encourages debt and helps banks and speculation at everybody's expenses but also the parties in the opposition find it a good idea!
The only party I have seen more reasonable about this is the ACT, but I could never vote any party that promotes a flat tax independently of each person's income as that would break society (like in countries such as Estonia where that exists and it's creating a huge inequality and social problems).
I am just disappointed to see that owning a property is encouraged AT ANY PRICE. If government or parties want to help people and their right to have shelter, help with tax credits for tenants who need it at certain point of their lives.