John Key has defended a decision to cancel sales of affordable housing in an Auckland development, saying low interest rates are making it easier for first-time buyers and people on low incomes to afford their own homes.

The Hobsonville Point development, started in 2009, allocated up to 100 of 3000 houses under the Gateway scheme, a helping hand for lower-income first-home buyers who could not afford to buy in Auckland.

The Government has sold 17 houses under the scheme - 14 of them for less than $400,000.

The price included section costs of between $180,000 to $200,000 which do not have to be paid for at least five years.


Other houses on the estate are valued between $450,000 and more than $1 million.

The Prime Minister defended the decision not to include more of the Hobsonville development in the Gateway scheme.

"The Government has looked at that programme and decided that's now not the most effective way of going forward."

He said one of the positive stories at the moment was that mortgage rates had fallen.

"So we think the capacity for lower income New Zealanders to own their own home is greatly enhanced by the fact interest rates are lower.

"If you have a look at the average home owner in New Zealand, they are paying about $200 a week less in interest than they were under the previous Labour Government."

Several international studies have described Auckland housing as over-priced and unaffordable.

Median house prices in the city are calculated at being more than six times the median annual household income. Prices must be less than three times the median income to be considered affordable.


Labour's housing spokeswoman, Annette King said low and middle-income first-home buyers had been squeezed out of John Key's Helensville electorate.

Ms King called Mr Key a snob and said he had benefited from state housing in his childhood but was now saying he would be horrified if state housing had been included in the Hobsonville development.

"The Prime Minister is out of touch and the Housing Minister needs to get out of his hidey-hole and answer questions," she said.

Minister of Housing Phil Heatley declined to comment on Hobsonville Point.

The Department of Building and Housing is reviewing affordable housing in Hobsonville, and a report is expected next month.

A spokeswoman for Housing New Zealand said the Government had never intended to provide more than 17 affordable houses on the development under the scheme, despite the speech made by Phil Heatley in 2009.

Auckland's Deputy Mayor, Penny Hulse, said affordable housing was a major problem in Auckland and not delivering on the 100 houses would be a setback for lower-income families.

* For first home buyers earning under $100,000 a year
* They can get a mortgage to build or buy a house on state land
* Must have at least a 10 per cent deposit
* Have 10 years to buy the land