KiwiBuild has not been a first-home buyers' scheme since mid-2020.
It enabled current or former homeowners to buy a KiwiBuild home provided they have no “legal or beneficial interest” in a home when they settle on the KiwiBuild home.
So first-home buyers have been competing against owner-occupiers for a limited number of “affordable” KiwiBuild homes.
Because price caps on KiwiBuild homes haven’t been lifted as house prices have soared, KiwiBuild homes can be tens, if not hundreds of thousands of dollars cheaper than comparable properties on the open market.
KiwiBuild price caps range from $500,000 to $650,000 depending on the size and location of properties.
Demand for these homes is high. In some instances, people can only buy a KiwiBuild property if their name is drawn from a ballot.
However, a spokesperson for the Ministry of Housing and Urban Development told interest.co.nz only 18 of the 833 KiwiBuild houses sold between August 2020 and March 2021 went to people who owned a home.
The spokesperson said KiwiBuild remains “primarily targeted towards first-home buyers”.
Govt prepared for the worst
A Cabinet paper from July 2020 (released in October 2020) explains the Government temporarily broadened the eligibility criteria because it was worried uncertainty caused by COVID-19 would derail much-needed house building.
It didn’t want a downturn to put developers off building.
The idea behind KiwiBuild is that the Government underwrites a portion of houses that meet the KiwiBuild criteria in a development. This then makes it easier for developers to secure finance, all the while encouraging them to build more affordable houses.
The Government was so worried in July 2020 that house building would stall, it allocated $350 million towards underwriting houses at risk of not getting off the ground due to COVID-19 - beyond KiwiBuild.
However, it never followed through with using this ‘Residential Development Response Fund’ because the market recovered quickly. The Reserve Bank has also provided banks with ample liquidity to support lending.
Govt to review status quo mid-year
Housing Minister Megan Woods, in the July 2020 Cabinet paper, said the KiwiBuild changes would be reviewed in six months’ time.
Six months have gone by. The eligibility criteria on the KiwiBuild website says current or former owner-occupiers are eligible.
Woods is still considering the impact of changes made to KiwiBuild in July 2020 and will report back to Cabinet in the middle of the year.
To be eligible for a KiwiBuild home, a single person has to earn below $120,000 a year and a couple below $180,000.
To avoid KiwiBuild homes being used for speculation, buyers of properties with two or more bedrooms have to live in the house for at least three years.
A caveat over the property could see the Government prevent them selling within this period.
Alternatively, if they sell without the Government’s permission, they could have to repay 30% of any capital gain - potentially on top of paying income tax under the bright-line test if they rent the property out (which they could also be penalised for).