State house subsidy for first home buyers

Prime Minister John Key has said he was confident the property market would settle down after the new rules come into effect. Photo / Thinkstock

First-home buyers in the provinces will be given a subsidy of up to $20,000 to move into vacant state houses, Housing Minister Nick Smith announced today.

The new FirstHome scheme would allow modest wage earners to be gifted a 10 per cent deposit, and would give them priority to purchase empty homes which were no longer needed by Housing New Zealand.

To be eligible, a buyer would have to earn $53,000 or less and commit to living in the house for a minimum of three years. A couple would have to earn no more than $80,600.
Housing New Zealand would make a grant of 10 per cent of the property's value, up to a maximum of $20,000.

Dr Smith said: "FirstHome will improve housing outcomes at both ends of the affordability spectrum. It will help modest income families in provincial New Zealand buy their first home.

"It will also free up capital from¬ these surplus vacant properties to invest in new state houses in high demand areas like Auckland and Christchurch."

The policy announcement comes as the Reserve Bank introduces new lending restrictions which mean most people will need a 20 per cent deposit to purchase a home.

The restrictions have generated concern that first-home buyers could find it harder to get into the housing market.

Around 400 state houses would be put up for sale in total under the new scheme - 100 in the next year. The largest number of vacant properties were in Northland and the central North Island.

The first 41 homes would be available for purchase on Monday in places such as Otorohonga and Invercargill, and had an average value of $120,000.

Dr Smith said there was nothing unusual about selling off state houses, noting that 1280 were sold under the previous Labour-led Government.

The Housing New Zealand properties were either the wrong size or in the wrong location to meet demand.

The scheme was believed to be nearly cost-neutral, because Housing New Zealand was making a loss on the vacant properties.

Dr Smith: "Housing New Zealand advises that with the high holding costs of these properties with council rates, vandalism and upkeep, the cost of the FirstHome grants will largely be offset."

Where will the state houses be sold?

Housing New Zealand area Number
Northland - 63
North Waikato - 14
Rotorua/Whakatane/Taupo - 31
Hawke's Bay - 27
New Plymouth/South Waikato - 67
Manawatu/Levin/Wanganui - 46
Kapiti - 19
Marlborough - 17
Canterbury (excluding Christchurch City) - 26
Otago - 27
Southland - 23