Government's 5 per cent deposit first-home loan scheme failing in Auckland and Wellington

Monday, 8 February 2021

Even new homes in Auckland are beyond the reach of first time homebuyers under the Kāinga Ora first home loan scheme eligibility criteria.

Emile Steenkamp is earning a decent wage and saving hard but still can't break into the Auckland housing market.

He says it's frustrating the Government systems set up to help first-home buyers are no use to him.

The Kāinga Ora low-deposit first-home loan scheme allows people to access loans with a 5 per cent deposit.

But city property prices have risen so far that Kāinga Ora’s low-deposit first home scheme has stalled in Auckland and Wellington.

Emile Steenkamp is working and saving as hard as he can, but he says he can't save as fast as house prices are going up.

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“I’m saving everything I can, working as much as I can, but the prices are increasing more than you can humanly manage to keep up with,” Steenkamp said.

Steenkamp is a software engineer for a multi-national financial services company earning over the $85,000 before-tax income needed for a single person to qualify for a Kāinga Ora first home loan.

The limit for couples is $130,000.

He said the maximum price Aucklanders were allowed to pay for homes bought with Kāinga Ora first home loans was also now unrealistically low.

In Auckland the price caps are $600,000 for an existing home, and $650,000 for a new home.

Steenkamp earned more than $85,000 before tax in his day-job, but he also drove for Uber in his spare time.

He said he could afford to service a mortgage, and had appealed to the government to lift the income and maximum price caps on both the Kāinga Ora scheme, and also the first-home grants scheme.

The Government will announce initiatives designed to cool the property market and help first home buyers. (First published February 2, 2021)

“The settings are pre-Covid, pre-boom,” he said.

Tunde Finan managed to buy a house in November using a KÄinga Ora first home loan.

He was now looking to shift to Christchurch, but was dismayed by how fast Christchurch prices were rising.

In January alone, house prices in Christchurch rose by 3.1 per cent.

Young Cantabrians continue to use the scheme. But there were just 102 Kāinga Ora first-home loans granted to homebuyers in Auckland between February 1, 2020 and January 31, and just 32 to buyers in the Wellington region.

That compared to 474 in Canterbury, which has a population about two-and-a-half times smaller than Auckland.

In the deep south the scheme also continued to function better than in Auckland and Wellington with 123 loans made to buyers in Otago and Southland, despite their combined populations being just 20 the size of Auckland’s.

Wellington mother-of-two Tunde Finan, managed to buy a place in Lower Hutt in November, with a Kāinga Ora loan provided by the Co-operative Bank.

Her decision to switch to the Co-operative Bank was an “ethical” one as she wanted to bank with a New Zealand-owned bank which did not lend to fossil fuel companies.

The decision paid off when staff at the bank told her about the Kāinga Ora loans, and helped her apply.

Housing Minister Megan Woods says: “We are very aware of the significant barriers to home ownership that people are facing and are actively reviewing both the demand and supply settings and will have more to say about this in the coming months.”

She had a 10 per cent deposit thanks to money from her KiwiSaver and UniSaver accounts.

“It’s a huge security for me. I didn’t want to live a life where I was constantly at the mercy of landlords, of being kicked out, or putting up the rent constantly,” she said.

“After I bought my house, literally a month later, house prices went through the roof. They just went crazy. I wouldn’t have been able to buy it now,” she said.

David Cunningham, chief executive of the Co-operative Bank, would like to see more promotion of the Kāinga Ora First Home Loan scheme to ensure people wanting to buy their first home were aware of it.

“We wonder whether one reason why first-home loans have not taken off in Auckland is that even if a first-home buyer can find a home within the price cap, they generally need more than the income limit to pass the scheme’s servicing tests,” Cunningham said.

Housing Minister Megan Woods said changes were made in September to the Kāinga Ora scheme, but did not indicate any further changes were planned.

“Housing affordability is an issue across many parts of New Zealand and not everyone will be eligible for assistance as the focus of these initiatives is on supporting first home buyers to purchase modestly priced houses,” Woods said.

“A key focus of this Government is to fix the housing crisis that has been decades in the making,” she said. The government aimed to increase home-building both in the private sector, and also through a state house-building programme and KiwiBuild.

“We are making significant progress in fixing the underlying factors that affect the supply of new, affordable housing, but it will take more time,” Woods said.

The numbers across the whole of the Kāinga Ora first home loan scheme are trending down, and Cunningham expected them to fall further in Auckland and Wellington, if the caps remain unchanged, and prices continued to rise.

A 2019 briefing to the housing minister from Kāinga Ora said in the 12 months to May 31, 2019, 1209 Kāinga Ora first home loans were made, compared to 1673 in the previous 12 month period.

In the 12 months to the end of January this year, there had been 1124 first home loans.