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Home / Rotorua Daily Post

Samantha Motion: Kiwisaver First Home Grant price caps must rise

Samantha Motion
By Samantha Motion
Regional Content Leader·Bay of Plenty Times·
18 Jan, 2021 09:43 PM3 mins to read

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First-home buyers using the grant may wind up with homes in need of major renovations. Photo / Getty Images

First-home buyers using the grant may wind up with homes in need of major renovations. Photo / Getty Images

OPINION
When KiwiSaver was created in 2007, most of the rhetoric centred on helping New Zealanders save for retirement.

That's still a far-off prospect for many people in my Millenial generation and even more so for the Generation Z cohort following in our footsteps.

For these generations, the more immediate reason to join KiwiSaver is to get help towards taking a first step on to the property ladder.

Once you have a few years of participation in the scheme under your belt, you can withdraw some savings to put towards buying a first home.

You also get access to the First Home Grant, which offers $10,000 towards an existing property and $20,000 towards a new one, if you meet certain eligibility criteria. These include staying under an asset cap on the price of the property.

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In Tauranga, the cap is $500,000 for an existing property and $550,000 for a new build.

In the rest of the Bay of Plenty, including Rotorua and Whakatāne, it's $400,000 for an existing property and $550,000 for a new build.

The caps were raised to the present level in 2016 when the grant was known as HomeStart - a scheme introduced in 2015.

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According to the announcement from then-Minister of building and housing Nick Smith the change reflected "the $50,000 increase in the national median house price since the scheme began.

"We are deliberately increasing the cap for new homes by an additional $50,000 to help drive growth in new residential construction."

According to the Real Estate Institute of New Zealand, the median national house price rose $121,000 in the year to December, hitting a new record of $749,000.

In that period, Tauranga was up $112,000 for a new median of $825,000; the Western Bay was up $142,000 to a median of $734,000, and the Rotorua median hit $541,000 on the back of an $83,500 increase.

Those increases followed steadier rises. In the past five years, Tauranga's median has risen $305,000 and Rotorua's $291,000 - several times over the rise that prompted the last cap lift.

While not impossible, it's pretty hard to find anything to buy under the price cap today - including new builds.

Buyers committed to using the grant will likely wind up with a less desirable property - smaller, in a worse area, in need of more repairs and renovations - than was available under the threshold back when some people (myself included) got to take advantage of it.

That can be a tough compromise to swallow when you're talking about most people's first major investment, and one they must live in at that.

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It's time to update the First Home Grant house price caps.

They need to be lifted to a range where they can actually be useful for a generation watching first-home affordability slip further and further out of reach.

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