Aid for first-time home buyers likely

By KATHERINE HOBY AND NZPA

The Government is considering offering help to first-time home buyers shut out of the market by soaring prices, Acting Housing Minister Steve Maharey says.

But economic and property experts have cautioned that research into future social and economic implications needs to be completed before any decisions are made.

Mr Maharey said the Government has been in talks with community groups and iwi about "sharing the burden" of helping first-time home buyers into houses.

"In general terms ... we are keen to see if we can do things to help people buy a house."

He said one of the last things the Government would do would be to return to the days of the old housing corporation when the state was a major lender of mortgage finance at very low rates of interest.

Private home ownership rates have fallen over the last decade from 74 per cent to 68 per cent.

Options on the table include guaranteeing mortgages for those with no collateral, and offering suspensory loans. The Government would look at supporting people to get loans from the private sector and other areas, such as iwi and the Salvation Army.

Senior lecturer in banking at Massey University David Tripe said the scheme needed to be structured so "you have a long-term and very sensible solution to the problem".

"That's not to say that the idea is not sensible. I'm saying that serious work should be done, as it is when you embark on any new project."

Mr Tripe said just because home ownership was good for individuals, giving them security and social benefits such as a good credit rating, "it doesn't necessarily work just to multiply the numbers".

"It is important not to create a new problem further down the track by trying to solve a perceived problem we have now."

Care was necessary to ensure the policy would work in 20, 30, or 40 years.

"This is likely to alter the long-term income and welfare structure of the population - so it needs some serious thinking about," he said.

Consequences might include a glut of houses for sale on the market, and house prices tumbling when all those being helped sell up.

Massey University property studies professor Bob Hargreaves said he had become concerned about the numbers of people unable to buy houses.

"And we've been going backwards in this country, rather than forwards like others."

The model of New Zealanders' income level had changed from being egg-shaped, with many earning good solid middle incomes, to "an hourglass", he said.

"There are more of us up, and many more down now - and that obviously has a bearing on who can afford to buy a house."

Professor Hargreaves said there were more innovative financial ways to address the problem. There was some merit in considering granting accommodation supplement recipients a lump sum to help with a house deposit.

"We could do this by using state guarantees to reduce the risk for private sector lenders, and bring them to the party by using the power of the Government rather than injecting massive amounts of cash."

He said people delaying buying houses was a worldwide trend, though it seemed to have hit hard in New Zealand.

Reasons included less job security/more mobility, a delay in having children, difficulty saving a deposit, and a desire to repay existing debt before buying a home.

National Party housing spokesman Wayne Mapp said home ownership rates had dropped below Britain, Australia and the United States.

He said a traditional path to home ownership had been for state tenants to buy their homes, but the Government had consistently ruled that out.

House prices in Auckland continue to soar - they were up 10.5 per cent in January compared with a year earlier.

Nationally, house prices rose an average 10.4 per cent last year - a seven-year high, according to Quotable Value NZ.

In the past 12 months, national home affordability declined 24.4 per cent, meaning homes were nearly 25 per cent less affordable than a year ago. That was despite stable interest rates and a 2 per cent rise in wage rates.

The average house price rose 5.4 per cent to $195,000 over the December quarter.

However, ANZ chief economist David Drage said affordability had stayed relatively constant over the past five years, with average house prices 5 1/2 times average income.

Mr Maharey said the Government would be looking to be in a facilitating role rather than getting back to massive lending by the state.

He would discuss with Finance Minister Michael Cullen home ownership options that could be included in the next budget.

Mr Maharey declined to elaborate on how the new idea might work, or which groups he had been talking to.