First home buyers have been borrowing less lately. Photo / Brett Phibbs
A real estate leader says first-home-buyers' chances have improved with the Budget scrapping loan restrictions and extending grants to take account of rising prices but an expert said today's measures missed two important opportunities.
Housing Minister Megan Woods said Budget 2022 would remove house price caps from the first home loan application process entirely and caps on grants would be extended and reviewed every six months.
That would help more people get first-home grants and loans, Woods said. The loans are issued by selected banks and other lenders, and underwritten by Kāinga Ora to allow the lender to provide loans that wouldn't otherwise fall within their lending standards.
Jen Baird, Real Estate Institute chief executive, said it was time to scrap loan caps on new and existing properties.
But Katherine Wilson, the Property Council's advocacy head, said nothing to encourage the build-to-rent sector and not enough spent on infrastructure were two lost opportunities.
Baird was more upbeat.
"This is good news for first-home buyers. There has been really sobering reading about their chances of getting into the market for the last few years so they'll feel pleased. The reviewing of caps which remain on grants every six months will also be more reflective of the reality of the housing market today and in the future," she said referring to prices.
First-home buyers still needed to navigate the new credit law until it was reformed in about a month, she said.
"This will all mean first-home buyers look once again at the market. If the changes to the review of the credit law make things simpler, then the double impact of that and the loan and grant cap changes will give more confidence to these people.
"The challenges remain inflation, the global outlook and rising interest rates but this is a bright light for them," Baird said.
The new $50 million affordable housing fund to support housing development for low to moderate-income New Zealanders was also welcome, she said.
"In the last year, we've seen the Government make it less attractive for the private sector to offer affordable rentals," she said referring particularly to the removal of tax deductions for landlords.
"The Government stepping in to help people with housing in this way is good and I like that they're continuing to support housing development on iwi whenua," Baird said.
The Property Council's Wilson attended today's lockup and said the focus was on economic security, health, climate change and cost of living.
"But what does this mean for the property sector and why were critical issues such as transport, urban development infrastructure and housing virtually left untouched?" she said.
Some key points for the real estate sector, Wilson said, were:
• Extending the apprenticeship boost scheme via a $230m operational fund until the end of 2023 to support an expected 38,000 apprentices;
• Increasing the house price caps for first-home grants and removing first home loan caps;
• The new $50m affordable housing fund for not-for-profits to deliver rental places in Auckland, Tauranga, Rotorua, Napier/Hastings, Wellington and Nelson/Tasman;
• Establishing a fund for the development of the national planning framework and for local authorities to develop the first spatial planning;
• A new business growth fund to support small and medium-sized enterprises to grow.
Wilson said: "Housing continually remains a challenge for this Government. While it has changed New Zealand's approach to zoning, not enough government investment and delivery for supporting core infrastructure has occurred.
"We already saw $1.4b announced for Auckland, to prepare more land for housing last month. But we know a lot more cash is required to upgrade core local infrastructure to meet New Zealand's new density rules which will see a minimum of six-storey buildings within city centres," she said.
The council was once again disappointed to see that the Government had missed an opportunity to unlock the build-to-rent sector for the private market, she said.
"It is almost inconceivable that it has overlooked quick wins in terms of legislative changes that could open up the private sector build-to-rent market," Wilson said.
On the resource management side of things, one small win for local government was the announcement of a $178.7m programme to help develop the first natural built environment and spatial plans, Wilson said.
Jon Manns, head of strategic consultancy at real estate agency JLL NZ, said this wasn't a Budget for those concerned about the health of the country's housing market and crisis of affordability.
"The funding of public, transitional and emergency housing is welcome and much-needed, but will only help to treat the symptoms and not the cause. With the costs of housing having spiralled during the past decade, the Budget offered little to address the lack of supply, or the role that public transport can and should play in unlocking growth," Manns said.
Last Tuesday, the Herald reported how first-home-buyer numbers dropped by more than 2500 purchases last quarter as rising mortgage interest rates and tighter finance take a toll.
Kelvin Davidson, CoreLogic NZ chief property economist, said last week the number of first-home buyers fell from the record high 26 per cent share of the market in last year's final quarter when 6557 properties went to people buying for the first time.
In terms of the number of purchases, first-home-buyer (FHB) activity in this year's first quarter was at its lowest since 2014.
In the March quarter, they only accounted for 22.5 per cent or 4019 buyers, he said, down 2538 purchases between the two three-month periods.
The QV House Price Index out last Tuesday showed national values down 2.2 per cent in the past three months.
The Reserve Bank said first-home buyers borrowed $17.88 billion across 32,493 separate loans last year. That borrowing was nearly $8b higher than in 2017, when first-home buyers borrowed $10b across 23,702 loans.
The bank's research, released to the Herald under the Official Information Act, showed 49 per cent of the people who bought their first home last year during the market peak could face "serviceability stress" if interest rates hit 6 per cent. Interest rates are nudging 6 per cent at some banks.
The mānuka honey company has cut staff by around 70 to save money and reduce debt.