More than 2000 first-home buyers have snapped up new housing subsidies worth up to $20,000 in less than a month, forcing Housing New Zealand to take on more staff just to distribute the grants.
But new data shows surging house prices at the lower end of the market have eclipsed the subsidies over the same period.
Housing and Building Minister Nick Smith said the fast uptake of the larger HomeStart subsidies was a "stunning result", tripling the number of applicants this time last year under the old scheme.
"The scheme has actually proved so popular that Housing New Zealand has had to expand the number of staff who are processing the applications," Dr Smith said.
Housing officials predict uptake will climb to more than 80,000 over five years, and $435 million has been put aside to pay for the grants.
Dr Smith has begun a nationwide PR offensive to promote HomeStart, which was designed to stimulate growth in affordable housing.
The scheme was expanded in April to give singles or couples on modest incomes grants of between $3000 and $20,000, depending on how long they have contributed to KiwiSaver and whether the house is a new build.
New data shows even the largest subsidy struggled to match house-price inflation in Auckland in the month of March.
The AMP 360 First Home Buyer Affordability Report, published yesterday, shows housing remains "affordable" in all regions except Auckland and Queenstown.
The index tracked the lower-quartile (halfway between zero and the median) selling prices of houses and the median after-tax income of typical first-home buyers (a working couple both aged 25 to 29).
In Auckland, the price of a lower-quartile house in Auckland rose $32,600 over the month - from $554,600 to $587,200.
Labour Party housing spokesman Phil Twyford cited the AMP figures in Parliament yesterday, saying the increases "completely wiped out the HomeStart programme in a single month".
Dr Smith said record migration had placed greater pressures on housing.
"I accept the challenge has got more difficult because we don't have 40,000 people a year leaving for Australia. We're going to need to build more houses, and we're up to the challenge."
David Chaston of interest.co.nz, which published the AMP report, noted that monthly figures could be "a bit spikey" and tended to fluctuate.
He said that in most of the country, first-home buyers could still purchase a house with less than 40 per cent of their pay packet, as long as they had two incomes.
But in Auckland, house prices were pushing ownership even further beyond the reach of young couples. "House prices are rising faster than incomes, and they have been for a while."
Family share relief at locked-in house price
Bay of Plenty couple Kate Hickman and Todd Bennett are "stoked" they have already locked in a price for the home they are having built this year.
The couple, who are hoping to take advantage of the HomeStart subsidy, will build at Gate Pa in Tauranga, after buying a house and land package for about $430,000 - a price that was locked in, in December. It means they won't be affected by increasing prices that are eclipsing the new housing subsidies, which are meant to help home buyers.
The 21-year-old mother of one felt for people who are now getting the subsidy, but are only "in the same position if not worse off" as they were before the subsidy because of the rising prices.
Ms Hickman said they sent away their HomeStart forms on Tuesday and expected to hear back in a week or two.
- Scott Yeoman