Economist Bernard Hickey wary of benefits from increased HomeStart funding

Economist Bernard Hickey believes National's plan to double HomeStart funding for first-home buyers would push house prices further out of reach of Northlanders. Photo / NZME

Plans for an additional $10,000 grant to help first-home buyers with their deposit will push house prices up and further out of reach of Northlanders, a leading economist says.

The National Party is promising to increase government HomeStart Grants from $10,000 to $20,000 from January next year. The grant will be $30,000 if a new home buyer is building a home.

National says the additional grant means a further 80,000 people will be able to buy a first home over the next four years, on top of the 31,000 people the scheme has already helped.

In Northland, a HomeStart Grant can be used for up to a $400,000 home, or $450,000 for building.

National predicts its policy would enable 200,000 houses to be built over the next six years.

But economist Bernard Hickey said the extra buyers created would simply lead to increased prices.

The Government was better off building more one- and two-bedroom houses and selling them for between $300,000 and $400,000 to help struggling families.

"Unless there are extra houses on the market, all the increased support will do is push [up] the price of existing homes. We don't have flexibility of supply of houses, particularly in a region like Northland.

"Just before the last election, National increased HomeStart Grants from $5000 to the current $10,000 and the effect of that was house prices in Auckland alone went up by $250,000," Mr Hickey said.

"In the end, it'll be a bit like a dog chasing its tail as far as first-home buyers are concerned because they'll never quite get there as house prices will keep rising.

"Collectively, the Government, local councils and people need to deliberately build hundreds of one- and two-bedroom apartments and townhouse-style affordable properties to be sold for three hundred to four hundred thousand dollars."

Real estate agent Paul Beazley of L J Hooker in Whangarei said he was not sure whether more financial assistance to first-home buyers would push house prices up.

"If it creates opportunities for more first-home buyers in a provincial town like Whangarei where property prices haven't really got out of hand, then it's a good thing," he said.