KEY POINTS:
The Government will spend $35 million on a two-year shared equity pilot to assist up to 700 households into starter homes, Housing Minister Maryan Street said in a pre-budget announcement this morning.
The pilot will run in regions with the highest house prices: Auckland, Wellington, Nelson, Christchurch and
Queenstown.
"Many modest-income, first-home buyers in these areas have been shut out of home ownership as a result of unprecedented house price rises since 2002," Ms Street said.
She said one of the aims of the pilot was to see if people wanted it.
Under the pilot the Government would provide an interest-free loan on a house of between 5 and 30 per cent of its value.
"This reduces the size of the conventional mortgage an eligible household takes," Ms Street said.
The scheme would be limited to those with a household income up to $85,000, who met criteria. A maximum house price cap, varied regionally, would apply.
A minimum 5 per cent deposit would be required.
"The scheme has been tightly targeted specifically to assist a group of New Zealanders who have saved a deposit for a home, but who cannot get on the property ladder in the area where they live and work because starter home prices have moved too far ahead of the maximum mortgage they can afford.
"These households would normally have expected to buy their first home by now, except for huge property increases in recent years. While the existing Welcome Home Loan is able to assist such households in rural and provincial areas, a different tool is needed in higher priced markets," she said.
The pilot scheme would be launched on July 1. It would be monitored and evaluated after two years.
Regional house cap prices were Queenstown $385,000, Auckland $305,000, Wellington $260,000, Christchurch $255,000 and Nelson $240,000.
Ms Street was confident houses in those ranges were available despite median prices being much higher.
"Remember that these are first home buyers, these are starter houses."
The Government was open to moving caps as prices changed and would review the scheme quarterly.
The regions were chosen because they were one where it was hardest for modest income earners to get into their first house.
The Government's equity share in a home would vary depending on the level of unaffordability in a region.
In Auckland the maximum the Government would put in was 30 per cent of a property's value; for Wellington it was 20 per cent; Nelson 10 per cent; Christchurch 20 per cent and Queenstown 30 per cent.
The Government would not charge interest on its contribution but on sale it would get back its share with capital gain.
Other details such as any limits on lenders and incentives to buy out the Government would be revealed when the scheme was launched.
One incentive was that if a homeowner paid off 5 per cent of the Government amount they would get 1 per cent free.
"They can build up to taking over the Government's share if that's what they want to do."
Housing New Zealand would decide who could be part of the pilot and a fair basis for selection would be set up. How many loans were available for each region would be population based.
"At the moment it's not clear whether there will be a lolly scramble, it's not clear whether in fact first home buyers might prefer to sit and see how the market settles in the next year or two."
She said now was a good time to buy.
Other measures to help first home buyers included KiwiSaver where home buyers could get a $10,000 government subsidy towards their deposits; Welcome Home Loans, affordable housing developments and streamlined processes and standardising designs for building, plus more state houses.
- NZPA
