Prime Minister John Key regularly says that throwing money at problems is not the solution. Yet at least one of his ministers appears to think differently. Nick Smith has been flashing the cash big time by upping the ante on the HomeStart scheme
The scheme offers grants of up to $20,000 to help "eligible" people buy their first home. This week he raised the annual income cap for someone wanting the grant from $80,000 to $85,000 ($130,000 for couples).
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The value of properties the grants can be applied to has also risen, up $50,000 to $600,000 for an existing Auckland home, and $650,000 for a new home in the city.
Whether these grants really help homebuyers is a moot point. In business, the price of anything only comes down when people's ability to pay is reduced.
Unfortunately, not one new home will be built as a result of this extra government cash. And despite talk of 400,000 new homes being built under the proposed Auckland Unitary Plan, we have neither the manpower nor the skills to increase homebuilding much above current capacity. We also want homes that last longer than five years without needing repairs.
Foreign buyers
Land Information NZ released its quarterly survey of homebuyers in New Zealand covering the three months to July 31.
When the survey was launched in October last year the Government suggested it would show how many offshore buyers were acquiring homes across the country.
However, the Government now says the data is not used to form a register of foreign ownership, but is collected for property tax purposes.
So while government says only 3 per cent of buyers are from abroad, what it really means to say is that 3 per cent of buyers pay tax abroad -- and that tax residency is not the same as nationality.
For the purpose of establishing how many foreign nationals own property in New Zealand ... the LINZ data is pointless.
Million-dollar homes
Quotable Value says homes in Auckland now have an average price of $1 million, and that the national average is $600,000.
Andrea Rush of the part state-owned property valuation firm says Hamilton, Queenstown Lakes and Tauranga have seen some of the highest growth, and that values in Hamilton have risen 31.5 per cent since July 2015 -- nearly twice as fast as Auckland's 16 per cent for the same period.
However, during the past three months Auckland real estate has risen more than 5 per cent.
Prices stable
For the first time in five years, the Auckland housing market is showing signs that prices may be plateauing, says Wendy Alexander, CEO of Barfoot & Thompson.
She says the average prices of property sold by the agency in July was $867,681, a fall of 4.5 per cent on June. However, the median price of $840,000 is the same as in June.
Bad news
It is bad news for young first-time homebuyers as BNZ economist Tony Alexander tells them they will not buy at the same age as their parents and their debt will be larger -- although interest rates will be lower.
Writing in his latest newsletter he says first-time homebuyers will typically live further from where they work, will on average take longer to move into the location they want, and will not shift overseas due to threats of terrorist attacks.