KiwiBuild houses sell for less than first-home buyers paying

Thursday, 4 October 2018

Housing Minister Phil Twyford at the site of the country's first completed KiwiBuild homes.

New data confirms buyers lucky enough to be picked from the KiwiBuild ballot will purchase a property at a better price than they'd pay on the open market.

The ballot is currently open for constructed homes in McLennan, South Auckland, and for apartments being constructed in Onehunga, central Auckland. Plans have also been revealed for KiwiBuild homes in Wanaka.

The government wants to build 100,000 affordable entry-level properties over the next decade.

In Auckland and around Queenstown, KiwiBuild properties must be sold under a price cap of $500,000 for one-bedroom, $600,000 for two-bedroom and $650,000 for three-bedroom properties. Elsewhere the cap is a flat $500,000.

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Those price limits have led some to suggest the scheme is like Lotto - giving a financial hand-up to some first-home buyers, in the form of a cheap house, but not to others.

Corelogic said in many cases KiwiBuild buyers would pay less than those who were currently navigating the open market - and they would also get a brand new property.

The median price paid by first-home buyers purchasing one-bedroom properties in Auckland so far this year has been $550,000 - $50,000 above the city's KiwiBuild cap.

The bigger the properties are, the steeper the KiwiBuild discount.

'The price cap starts to look more meaningful in the two-bedroom bracket in Auckland and Queenstown,' analyst Kelvin Davidson said.

He said first-home buyers in both areas had been paying prices above the caps for two-bedroom properties.

'In Auckland City, in particular, a new two-bedroom KiwiBuild property priced at a maximum of $600,000 would be of great interest compared to the $713,000 that first-home buyers have recently been paying for properties of more variable age and quality.'

At the three-bedroom level, KiwiBuild would also undercut prices currently being paid in Wellington and Tauranga, as well as Auckland and Queenstown.

In Wellington, where the KiwiBuild cap is $500,000 the median price paid by first-home buyers to date in 2018 for a larger property is $657,400.

'Another interesting aspect to consider is new properties themselves,' Davidson said.

'In Papakura, for example, where the McLennan KiwiBuild development is located, the median value of a recently-built three-bedroom property is $684,500. That is above the $650,000 KiwiBuild cap. But what is most interesting is that the McLennan properties are listed for $579,000 – about $105,000 less than the 'market value'.

'It's important to bear in mind that these median price paid figures clearly relate only to first-home buyers that have already been successful in buying a property whether that's a new or older property. However, the aim of KiwiBuild is not so much to target or help those that can already afford property, but to ease the problems for people who've so far missed out.

'Overall, the KiwiBuild price caps will have the most bite as the number of bedrooms in a property increases. Indeed, it wouldn't be hard to imagine would-be buyers for larger properties in Queenstown, Wellington and parts of Auckland really jumping at the chance to get into a new KiwiBuild home.

'And although property values in Auckland and Queenstown have generally flattened off, continued growth in Wellington will only make the KiwiBuild appeal even stronger.'