Declining home ownership rates are turning the corner, Building & Construction Minister Smith says while talking up increasing numbers of first home buyers turning to govt subsidies

Declining home ownership rates are turning the corner, Building & Construction Minister Smith says while talking up increasing numbers of first home buyers turning to govt subsidies

By Alex Tarrant

Building and Construction Minister Nick Smith says declining home ownership has “turned the corner” and that he’s holding out for first home buyer and rental affordability measures to start improving as house price growth flattens, take-up of government deposit subsidies increases and as the Budget 2017 Accommodation Supplement hikes kick in.

He has already been helped by his own officials, who on Wednesday released an updated version of the government’s Housing Affordability Measure (HAM) which included a “minor adjustment” relating to income data boosting the number of first home buyers in the affordability range.

And a tweak in the way MBIE describes its buy and rent affordability measures was also incorporated into the latest release. Where the initial release referred to the proportion of potential first home buyers above and below a “national affordability benchmark,” HAM now proposes to indicate the proportion of first home buyers “with below-average income after housing costs.”

The latest HAM Buy measure – or HAM 1.1 as MBIE calls it – shows 77% of potential first home buyers nationwide earned below the average income after housing costs for purchase of a modest, two-bedroom house in the area they rented in at March 2016, similar to the 78% in June 2015.

The headline nationwide figure for Ham Buy 1.0 released back in May had indicated 81% of households came in below what was termed then as the ‘national affordability benchmark’. We’re not supposed to compare the headline readings from the two reports – we’re just doing so to indicate how the tweaks have allowed for a lower headline ‘unaffordability’ figure.

Everyone’s at pains to emphasise that the series is still experimental, by the way. And for those wondering, in Auckland, HAM Buy 1.1 was unchanged at 82% - although after a steady rise from about 76% in 2013.

Labour’s Phil Twyford said the numbers showed New Zealand “needs Labour on housing,” and talked up his party’s policies including taxing speculators, launching KiwiBuild and providing greater infrastructure financing. Labour has also proposed tightening foreign buyer rules.

“Nationwide, 77 per cent of potential first home buyers cannot afford to buy. Sixty per cent of renters cannot afford to pay the rent without experiencing hardship,” Twyford said. “Housing is the major driver of poverty and inequality in New Zealand today. It is taking a terrible toll on people, from families who cannot afford a home of their own right through to families living in cars.”

Government deposit subsidies

The release of the latest HAM reports on Wednesday (not that MBIE or Nick Smith decided to tell anyone with a press statement or anything) provided a base for both National and Labour to talk up their housing affordability books as our 51st Parliament heads to its final session on Thursday.

The government over the past three years has boosted deposit subsidies for first home buyers, many of whom have had to clear their KiwiSaver accounts to cobble together a 20% deposit (and in some cases less) for an entry-level home as house prices rose faster than incomes.

Asked by media whether he was dismayed by the fact first home buyers increasingly needed to rely on subsidies to get anywhere near purchasing a first home, Smith focussed on the fact that government had ensured the support was there.

Earlier in Question Time he had touted HomeStart grants as having gone from strength to strength: 15,400 first home buyers had received $75 million in HomeStart grants towards a deposit in the past year, an average of nearly $5,000 per grant. This was up $10 million from the year before. Government was on track to assist 90,000 first home buyers over five years through the scheme, he said.

“Even more significant is the growth in KiwiSaver first home withdrawals. These had increased from $200 million to $495 million, then $655 million in the last year,” Smith carried on.

“We all know that the most difficult hurdle for a first home buyer is pulling together a deposit, particularly when we have such low interest rates,” he said.

Back facing the media, Smith said he was not at all dismayed that so many first home buyers were having to rely on government subsidies. “In my view one of the most important assets that people will build over their working life will be their home. And if people are able to use the KiwiSaver scheme to build up the funds for a deposit, pick up a government grant, and buy a home, that is good,” he said.

CoreLogic data showed that, since the HomeStart scheme had been in place, the proportion of purchases made by first home buyers had grown from 18% three years ago to 21%. “That is encouraging and is showing that we are turning the corner on this very long-term challenge of improving home ownership.”

“If we look historically in New Zealand at those periods where we’ve had very high home ownership – you used to be able to capitalise the family benefit – it is actually during a period of absence for about 20 years of any sizeable assistance for home ownership that we have seen those numbers decline.

“It’s the government’s view that there are broader benefits for society of more people owning homes, and that’s why we think it is good use of public money to be assisting people to pull the money together for a deposit and to get into their first home,” Smith said.

Would he want to see over time a trend emerging of first home buyers not requiring government subsidies to purchase a property?

“My first priority is in terms of trying to change that long-term 30-year trend of declining home ownership. A good way to do that is to give a leg up for those first home buyers. That’s what we’re doing with that KiwiSaver Homestart scheme. It’s growing each year and it’s showing it’s working,” Smith said.

Former doubters were now joining KiwiSaver to use it as a mechanism for getting into home ownership, “and I would encourage that.”

Turning a corner on home ownership

“The combination of high rates of new home builds, flat house prices, and the KiwiSaver HomeStart scheme shows that New Zealand has turned the corner on improving home ownership,” Smith had earlier said in Question Time.

That had included an exchange with Labour’s Phil Twyford on the latest release of the HAM series. Twyford put to Smith that since he gained responsibility for the housing portfolio, the proportion of Auckland first home buyers spending more than 30% of their income on housing had gone up by 29%. This was in regard to another HAM measure released by MBIE on Wednesday.

Smith didn’t accept the figure, instead choosing to launch into an attack on Twyford’s ‘Chinese sounding names’ saga a number of years back, which new Labour leader Jacinda Ardern had expressed discomfort with earlier this week.

Twyford continued by asking whether $220 a week was enough for a family to live on, “given that the housing affordability measure shows that since he became Housing Minister, there has been an increase of one-third in the number of potential first home buyers in Auckland who would only have $220 left per week, after their mortgage payments.”

Smith again dodged the question. “I can confirm that since I’ve been the Minister of Building and Construction, the number of houses being built in Auckland has more than doubled. It has gone nationally from 14,000 to over 30,000 homes per year, and I think every member in this house knows that the core of the solution of our housing challenges is getting more houses built, and that’s exactly what we’re doing.”

A patsy question from National Party backbencher Alastair Scott on what measures the government had taken to improve housing affordability had Smith touting Accommodation Supplement increases, KiwiSaver withdrawals and Homestart grants.

Twyford raised that Fletcher Building had noted earlier Wednesday that 5,000 fewer houses were built in Auckland over the last year than were needed to keep up with population demand. “Does that constitute a building boom?”

Smith: “I woke up this morning to hear reports that there was shortage of builders, of plumbers, of electricians, that there was a shortage of cranes, of concrete trucks. And that is because the building industry is at an all-time boom, and in the pipeline is more than 100,000 homes over the next three years and the biggest building boom in New Zealand History.”

Could Smith confirm that only a few hundred affordable homes were built in Auckland last year? Well, asking a Minister whether they can confirm something or not generally allows them to respond any way they like under Question Time’s rules:

“I can confirm that more homes were built in Auckland in the last year, than there has been for more than a decade,” Smith said. “And, that there is a record pipeline of new homes coming on stream. I can also confirm that in the last year, Auckland house price inflation was minus 1%, the lowest in 10 years, showing that with a growing in supply, housing affordability issues are being addressed.”

Twyford brought it back to the HAM series: “Does he realise just how ridiculous it is that he is still blaming Helen Clark’s government, when after nine years in office, 77% of potential first home buyers cannot afford to buy, and 60% of renters cannot afford to rent without going into financial hardship?”

Those numbers were “garbage,” Smith replied, triggering Labour MPs to yell back that they were from the HAM series. Smith continued though: “If he listened to what Stats New Zealand said on this index released today, they would know that they’ve got about as much credibility as the fiasco that embarrassed his own party over Chinese-sounding names.”

Whether he was questioning Twyford’s credibility or that of the HAM series is open for debate.

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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Seriously, what a farce.
"Former doubters were now joining KiwiSaver to use it as a mechanism for getting into home ownership, “and I would encourage that.”
Kiwisaver is either a plan for old age or it isn't. What happens when those who have stripped their Kiwisaver get to retirement age and have nothing other than the house ( if that; many will retire with a mortgage)? Answer: The Government will have to support them; the very thing that Kiwsaver is supposed to avoid.....

Totally agree. All this does is add to aggregate demand. The primary beneficiary of this type of release is vendors.

Agree. Kiwisaver benefits keep getting eroded, but they are making it more attractive to withdraw to buy a house. So they are treating home ownership as a better form of retirement investment, over other forms, such as putting the money towards a business or shares. All accessing kiwisaver early like this does, is push up house prices even more, because it means people can afford to pay more. Many couples could fariely easily have 100-200k combined with kiwisaver, along with other savings, for a downpayment, if they have been in it since the beginning.


Bit on the nose to start crowing like a cock after nine years about housing affordability and homelessness.


What a joke.
Increasing 'affordability' through subsidy.
Home ownership by foregoing retirement savings.
100k new houses in the next 3 years.
"Rubbish numbers" from his own report that he quotes.
Home ownership has turned a corner.


Nick Smith is a fool. His work on the construction industry retentions scheme was a shambles and completely unworkable. He does not exhibit the basic level of comptence required for his role.

The government seems to think that home ownership is a far better form of investment than kiwisaver. Although the way housing has been pumped up through all the different factors, it is has been the case. But that could change if the bubble bursts.


A hilarious response from Nick Smith but not unexpected. Let's use public money to saddle FHBs with more debt under the pretense of helping them get on the property ladder.

Maybe if housing was made less attractive of an investment, then this problem would solve itself over time?


His portfolio should be renamed so that he is the Minister of Homelessness.

Surely that would solve the problem overnight, in National's eyes.
History would show that to fix it all you need is someone to front it and lie about there being no issue.

Or hopelessness?

Although to be fair to Nick, from memory there was about 6 years of doing nothing by whoever the previous minister was before he got the job. At least Nick has done some minor tinkering instead of nothing...

He at least shambled around confusedly with a clipboard and talked mendacious drivel. Did the previous numpty even do that?

The previous numpty was Maurice Williamson. He just let MBIE go completely off the rails and do whatever they pleased and made some giant cock ups with the building code. This made compliance problems worse, Councils more difficult and pushed up the cost of any building consent considerably.

In fact things were so bad at MBIE that their website had a section on the front page for filing corruption complaints against MBIE. The Ministry also stabbed other Ministries in the back by not consulting with them. Unsurprisingly Maurice Williamson went to the back bench so he would create any more disasters. Nick Smith has pottered around but not much has changed. We certainly don't have the houses that are claimed because there aren't enough.


Nick Smith is a joke. His office still has not replied to me either. Maybe he should concentrate on his portfolio duties rather than trying to use statistics to lie. FHB will certainly be able to turn a corner with a house price collapse, but not with this pre-election nonsense.

As 2 Tooth pointed out above this is a bit rich from Nick Smith. National was vigorously denying that there was a housing problem until late last year. Anyone who believes him is extremely gullible.


In the same week ANZ NZ announces a $1.275 Billion 9 month profit, principally earned from the debt fuelled housing ponzi, we have a Government minister praising the fact that Kiwi's are able to pile their retirement savings into an unaffordable home.

Pouring more fuel on the fire is not going to save the building.

Please get a grip, accept the market needs to correct and end this madness!

Perfect mechanism for thieving the retirement savings of the young.

We all deserve to own our own homes but they shouldn't be handouts from the government.

Every home owner who has enjoyed capital gains has enjoyed handouts. That is the nature of inflation caused by money creation.

Agree, we should be able to afford them ourselves. You aren't going to tell me that a couple on $20/hr each can afford to buy in Auckland are you?

We all deserve to own our own homes but it doesn't have to be in Auckland.

40% investor LVR's means this $40 an hour couple can't buy anything outside of Auckland whilst they are living in Auckland. Unintended consequences. I have never lived in a house I have owned And now with 40% LVR's the RBNZ has killed any form of home ownership for most.

Isn't it 20% for your own home

DGZ, You brought in Auckland, just lucky the Chineses came to town, bit rich

Oh please, give me a break. I bought in the 90's and early 2000's as if it is my fault.

So you benefited from affordable housing supply created in part by earlier public-private building initiatives, cheap Housing Corp loans etc. Bit rich to benefit from that then turn around and say no one else should be able to anymore.

Update on situation in Ireland: still a mess:
"There were far too many developments built and not to an acceptable standard."
"The tax-driven building boom scarred the local economy long term too as manufacturers were “crowded out” with low-skilled workers being sucked into construction, he says."
“The scheme made things worse, both in that it left ghost estates but it also crowded out the real business economy – the exporting and manufacturing economy – and it created a lost decade,” he says.
"Last year they had an infestation of rats from the derelict houses which were drawn to the smell of food. She put traps down in the house most days."
"That whole scheme that allowed those ghost estates to happen was initiated with no evidence, only lobbying"
"Sirr suggests a novel use for some estates as a lesson to “evidence-free policy” pursued by government during the boom times"

"He bought the house off plans for €165,000, all with his own money..... just five houses have sold in the estate in the past four years, ranging in price from €17,000 in December 2013 to €40,000 in July 2016."

But that could never happen in Auckland! ( NB: It doesn't actually matter 'why' it happened in Ireland either. But, that it did...)

Gee bw. the price went from 17K to 40K in 30 months. It's a boom. Buy. Buy. Buy. .....oh..... hang on.

Wow, €165,000 would barely be enough to pay for the paperwork of an Auckland house (survey, architect, engineer, goetech, council consent, resource management, watercare, power company, phone company, producer statements, etc).
Maybe that was Ireland's problem; not enough cling ons clipping the ticket led to too many houses being built? Luckily we will never have that problem here!

It is good that election just a month away. NZ has a chance to shut such voice and policies.

Lets Vote for...........

Lets vote for the odds on favourites to win according to Sportsbet i.e. National who are paying 1.30 to Labour's 3.25.


He can certainly talk some rubbish

Govt has done sweet FA to improve affordability

A handout doesn't make it more affordable, its just emphasizes the issue that it is not affordable

Taking your retirement savings to buy a home isn't an investment as you still require a roof over your head when you are retired. Sure you can downsize or move somewhere cheaper or even go back to renting but lots of people are using their Kiwisaver to buy grossly over valued Dumps, its hard to downgrade from them.

Its an easy fix

Stop foreign buyers, only NZ citizens should be able to buy NZ properties. It shouldnt be a stock market as its just a matter of providing shelter for our people

Open up the city limits for Auckland right out to Orewa & Bombay that will reduce the price of land and make building so much cheaper

Stop all the unskilled & student immigration, it doesnt add value

Invest in high quality house factories and build houses that will be in demand and affordable

one of the reasons why FHB's are able to think about buying a house is due to the fall in foreign money in the property market at the moment.... one of the points that the National Government refused to accept... according to them, it was just 3% of foreign ownership .... what a load of !!!!!!!

everytime minister smith stands in front of the TV spouting his nonsense, i think ahh more voters will head labours way.
they need to get him out of the way for the election send him on a long holiday

can I add to that list of MP's who should go on a looooooooong holiday, in order of priority
1. Bill English
2. Steven Joyce
3. Paula Bennett
4. Simon Bridges
5. Jerry Brownlee

You must be a Judith Collins fan since you left her out.
Minister for Ethnic Communities Judith Collins has today announced the opening of the next funding round for the Ethnic Communities Development Fund.

The contestable fund provides $520,000 annually for projects that support leadership and social cohesion in ethnic communities as well as cultural events.

“The purpose of the Fund is to support the development of established and emerging ethnic communities. It’s important that all our ethnic communities have a sense of belonging and participation in our wider society.”

her stare is too scary.. didn't want to trample on her feet

It's those Jack Nicholson eyebrows

Minister for Replacing White People. What a racist traitor.

Wow...didn't realise our government is actively working to reduce community integration.

Must...protect....banks/speculators....above....citizens. Sad really. Vote accordingly.

So a scheme introduced 3 years ago that requires 3 years kiwisaver contributions is paying out more in its 3rd year.. who would have thought? ><
More people on government benefits, like every other stat with this government, is a sign of success.

I missed out on the subsidy because a my employer forced me to sell my stock options and suddenly I earned too much. So despite paying a boat load of tax I still had to compete with young people buying $499,999.99 shoebox houses with wheel barrows of debt. This pushed me into more expensive property because frankly all the small houses are now overpriced.

This subsidy is not helping young people. It's corporate welfare to banks and landlords. Same as the accommodation supplement, and frankly any subsidy.

Every party seems to be taxing my tax and handing it out to the lazy.

Labour/Greens to beneficiaries. NZ First to rich boomer's electric bills. National to the wealthy corporates and landlords. A bunch of thieves, all of them.

Seems just about everyone else has already criticised this using your retirement fund to buy an overpriced house. One way to lose some of it, eh?

Why the hell would you need subsidies to own your own home. The simple math of it is house price relative to incomes. I look back on my own situation for a simple comparison. Was working at the airport earning 35k gross per year bought a house in South Auckland for 86k in 91. That same house sold last year for 750k and the same airport job is now paying 55k a year. That first house at 23 has set me up for life financially. Hey Nick remember when you bought your first home? 3 to 4 times not 10, less competition with investors, you weren't competing with foreigners. FHBs would love to have had the opportunities you had and you know the real stats so stop bullshitting. Total incompetence!

Agree...this is pretty crazy.

And we're importing workers from the Third World depressing the wages locals can expect, while importing wealthy buyers from overseas, escalating prices that these workers will have to pay to have a home. Crazy.

At the same time as still expecting them to fund the retirement of folk who are set up financially for life.

One word : Incompetent.
Let's not forget that when Key was elected he effectively promised to sort the housing fiasco out.
So, he either lied, or totally failed.

Managed to get knighted tho! For all his hard work I imagine .. & he cares about the poor children, apparently .. Happy to let house prices rise & along with it rents. More children living in cars & motels. Nice one, John!

Isn't he contradicting the PM only yesterday, when the PM and the real estate agents said the LVRs had been preventing FHBs from buying? But isn't he now saying that year on year FHBs were increasing. Also he never answered the question about whether the government would look at increasing FHB subsidies, he just went on a tangent.

I am not even going to bother reading anything National has to say anymore re housing. Why are they suddenly interested now? Shortly before an election! Pffft. Until recently there wasn't even a crisis, apparently. Do not trust them at all!

I can see by your red face Smutty you are embarrassed to have to deliver this drivel forced on you by your masters. It is well past it's sell by date.
National need to start recognizing that they have ignored the rank and file for too long.

Youth suicide and rural youth unemployment is an area that needs attention yesterday for example. I would suggest we are not going to get it with this team of time servers.

Can we please stop this nonsense. The ability of real NZ homeowners will continue to be eroded until Governments (this one or the next) stop favouring housnig as an investment class above all others. Stop treating housing as a NZ's primary means of channeling foreign capital into NZ. Lets work out how much housing we really need.

At present all the forecasting is based on older single and two-person households needing a single dwelling. Bollocks! From now on, flatting for seniors (and boardinghouses for those who have always been in rental accommodation) are the new reality. Thank you National and Labour of the 1980's and 90's fr your foresightedness.

Go back and read 'Advice to the incoming Labour Government' of 1984 and realise how little has changed.