Extra cash for housing and first-home buyers

More money for state houses, an expanded leaky homes advisory service and more bridging finance to help poorer first-home buyers were some of the carrots dished out to the housing sector.

New funding allocated in the Budget included:

* $134 million to buy an extra 1300 new state homes in the next four years, mainly aimed at reducing waiting times for areas of highest housing demand such as Auckland.

* $22.6 million extra for the new Department of Building and Housing, mainly aimed at beefing up the Weathertight Homes Resolution Service, but also to give advice to rental market tenants and landlords.

* Extra support for first-home buyers, including the introduction of a home deposit subsidy of up to $5000 and easier access to mortgage repayment insurance.

Property investors had long expected a cut in the amount of tax claimed on their buildings and this was lowered by a quarter - from 4 per cent to 3 per cent annually.

Andrew King, president of the Auckland Property Investors Association, criticised the move, saying the Budget had headed in entirely the wrong direction on housing.

He estimated changes to the depreciation regime would cost residential landlords nationally about $60 million in lost tax deductions and hit the industry hard.

"The Government is hurting the rental market at a time when yields for investors are falling and house prices are at best going to be static," King said. "Reducing depreciation on buildings doesn't sound like much, but is a 25 per cent reduction in tax able to be claimed which will hit landlords' cashflow hard.

"The depreciation on a $300,000 house is $12,000 annually under the old regime, but this would reduce to $9000 from now on. This is only for one house, but many landlords own many properties.

"Some landlords could lose millions of dollars annually in tax claims because of the change."

King said the provision of more state houses would increase supply at a time when private landlords were already finding the going tough.

However, the Budget won praise from Real Estate Institute president Howard Morley for three of the four housing moves - more state housing, help for first-home buyers and expanded weathertight services.

But he predicted some landlords would sell their investments because of the depreciation cuts.