Home buyers' new hope

From June 1, buyers can use their savings to make a deposit. Photo / Michael Craig

KiwiSaver rule change will free up cash for thousands looking for a first home.

Tens of thousands of first-home buyers stand to benefit from a KiwiSaver change coming into effect next month.

Until now, people wanting to use their KiwiSaver savings to buy a first home had to wait until settlement day to access their funds.

That has made it especially difficult for those building new homes as most builders require an upfront deposit.

In the 2014 financial year, there were 13,341 first-home withdrawals from KiwiSaver, totalling $30.6 million. That number is likely to increase this year.

Changes last month increased the subsidy for first-home buyers who meet income and house-price caps and use their KiwiSaver funds.

Those buying new houses can get up to $10,000 each, up from $5,000.

More than 2,000 first-home buyers snapped up new housing subsidies in less than a month, forcing Housing New Zealand to take on more staff to distribute the grants.

Mortgages for construction are exempt from loan-to-value restrictions that make it hard to get a loan with a small deposit.

Some banks are lending up to 95 per cent.

The deposit withdrawal change slid under the radar as the Government introduced other KiwiSaver changes on April 1, but Housing Minister Nick Smith's office confirmed to the Herald on Sunday that from June 1 buyers can use their savings to make a deposit.

The funds needed to be protected in a solicitor's trust account until settlement and returned to the KiwiSaver provider if the sale did not go ahead.

Smith predicted the change, plus others that broadened the number of people eligible for the KiwiSaver HomeStart subsidy, would help 90,000 people into home ownership over the next five years.

Property commentator David Whitburn said the change was significant. "It will make a massive difference to a lot of people. It gives them the chance to buy a property off the plans that they previously would not have been able to buy."

He said buying new could be a smart move for a first-home buyer because most properties would increase in value by the time building finished.

He knew of cases where a home's value increased by more than $100,000 between the contract being signed and the house's completion.

When the deal was settled, the buyer would end up with more equity and be able to access better interest rates and bank specials.

Broker John Bolton said he had brought the Government's attention to the problem of access to a deposit and was pleased the rule had changed. He said it had frustrated a lot of buyers.

One hundred special housing areas have been approved for new-house development in Auckland and Bay of Plenty. Those properties are being fast-tracked through the consent process.

In total, there is provision for more than 40,000 new homes in Auckland. A percentage have to be affordable, but the number varies depending on the area.

Smith's office said Auckland Council was considering more areas to be designated for special housing.