Major banks are set to drop deposit thresholds for apartments, making it easier for cash-strapped first-home hunters to get a foot in Auckland's rampant property market.

The Weekend Herald can reveal that several major banks are reviewing their apartment lending policies, with tentative plans to reduce minimum deposit requirements from 20 to 15 per cent.

The proposal is aimed at owner-occupiers rather than investors. It is being pitched at the first-home-buyer market ahead of changes to Auckland Council's Unitary Plan that will allow more high-density housing and apartment developments.

The changes are yet to be signed off but could mean someone buying a $500,000 inner-city or city-fringe apartment could potentially secure finance with $75,000 deposit - down from the current $100,000 minimum.


Kiwibank last night confirmed that it was reviewing its criteria for apartment-market lending in what it said was a move to support its customers into home ownership.

Loan Market mortgage adviser Bruce Patten said the changes would have a dramatic effect on the first-home-buyer market by making apartments more affordable.

"I think it will be huge for the apartment market in terms of their value. It will be extremely good for people who are trying to get in and can't afford it because they're too blimmin' expensive. It just gives people another option in terms of their ability to buy."

Mr Patten was aware of at least two other major banks preparing to implement the new policy and suspected others would follow.

He also understood Housing New Zealand was reviewing its Welcome Home Loan criteria to allow more people to buy apartments through the Government-backed lending scheme with just 10 per cent deposit.

Housing NZ spokesman Mike Webber confirmed last night that it was reviewing eligibility criteria for apartments.

A decision was expected in the next few months.

The Weekend Herald looked at apartments available on Trade Me yesterday to calculate how much people could save on their deposit.


A two-bedroom, two-bathroom, 103 sq m place on Takinini School Rd in Takanini, with an asking price of $410,000, would require a $61,500 deposit, instead of $82,000. That's a difference of $20,500.

A two-bedroom, one-bathroom, 55 sq m apartment in Eden Terrace, close to the CBD, with an asking price of $429,000 would require a $64,350 deposit rather than $85,800 - a difference of $21,450.

And a 154 sq m apartment with two bedrooms and two bathrooms on Custom Street West in the city centre, with an asking price of $649,000, would require a $97,350 deposit, instead of $129,800 upfront. That's a difference of $32,450.

Mr Patten said higher bank deposit thresholds of 50 per cent were likely to remain on smaller apartments - generally anything less than 50sq m - which were considered to have lower resale value and be higher risk for banks.

Banks would still have to live within Reserve Bank loan-to-value parameters, which set a 10 per cent cap for any new lending on deposits of less than 20 per cent.

While the changes would help more people into ownership, they could send apartment prices higher as the number of eligible buyers jumped, Mr Patten warned.

The average Auckland home is now worth $828,502, according to QV figures. The OECD issued a warning this week that rising house prices were burdening Kiwi households with debt and posed a risk to financial stability.

Apartment Specialists director Andrew Murray said the proposed changes would put the apartment market "through the roof" as house hunters priced out of standalone homes turned to entry-level apartments.

However, dropping the deposit threshold even further to 10 per cent would help more people across the line, especially low-income immigrants renting smaller apartments in the city centre.