Government Promises Help For First Home Buyers … But
Before the election last year and even after they took power our new Labour led Government promised help for first home buyers, but 6-months on how are they doing?
Easy To Make Promises
We all know that it is easy to make promises, especially when we believe that we will never have to honour them.
Before the election last year that is probably exactly what the Labour Party believed – they could be critical of the Government of the day, and promise to do better to offer help for first home buyers but they probably never through that they would have to come through and honour those promises. In reality they probably never thought they would be able to form a Government until Winston Peters held the balance of power, and then it was a matter of doing a deal to take power, and that is what they did
What they actually promised will probably never be fully clear, but we do know that Labour made promises to NZ First (to Winston Peters) that the National Party were not prepared to
One Promise Was To Offer Help For First Home Buyers
Both the Labour Party and NZ First were critical of the National Party and the lack of help for first home buyers
Housing became a political football.
Of course we should all know that housing affordability is not an easy thing to fix, but obviously many people believed what they heard;
- Winston talked up the issue of offshore investors (Chinese) that were buying up all the houses and while not directly acknowledged in the coalition agreement, Jacinda Ardern was firm in stating Labour would be sticking with its own immigration plan of reducing net migration by 20,000 to 30,000, and repeated it in the announcement of Labour’s deal with New Zealand First.
- Labour’s KiwiBuild programme which promised to build 100,000 high quality, affordable homes over 10 years which would fix the housing issues. That is a ten-fold increase in the number of affordable houses being built in Auckland each year, from 500 to 5,000 but now we hear that the houses planned to be built by the KiwiBuild programme will not be idea first homes for families as this week the housing minister Housing Minister Phil Twyford confirms that Kiwibuild houses will likely measure 30 square metres for studio dwellings and 45 square metres for one or more bedroom dwellings which is smaller than a standard double garage and a long way from the aspirational dreams of many first home buyers.
Now, just a few months into the new Governments 3-year term we start hearing that the promised help for first home buyers is unlikely to be honoured.
What has Gone Wrong For First Home Buyers?
If people took the time to understand the factors causing the housing crisis that has made it unaffordable for first home buyers they would have known prior to the election that there was no simple fix. As mortgage brokers in Auckland we have always said that housing should be an issue that all political parties should be able to work on together and by doing so could come up with an overall plan that can help first home buyers.
While we can agree that offshore buyers do but houses and that there need to be more houses built, there are more issues that could help for first home buyers.
Unrealistic claims like what we are seeing with the KiwiBuild programme are not really going to help anyone and especially if they are going to build small apartments unsuited to families which the banks will not lend money on.
New Zealand needs better.
Yes, we need more houses built to satisfy demand but we want houses that are suitable for Kiwis to live in and houses that banks are willing to provide mortgage finance on.
Yes, we need affordable houses – but what is affordable?
First Home Buyers Want Affordable Houses
Buying your first home is not easy – it never has been and probably never will be very easy, but we would all like to ensure that young Kiwis can buy a home for their families.
But what does the media mean when they talk about houses being affordable?
The term ‘affordability’ is widely used with general consensus the term ‘housing affordability’ means you are able to pay without incurring financial difficulties. The measure uses a ratio of housing cost to income and is often used as a way of measuring affordability. The ratio is calculated as housing cost as a proportion of disposable household income (income after tax) and a housing cost to income ratio of 25 percent has been used as a threshold is widely used both nationally and internationally to deem affordability.
When people calculate housing affordability they are using averages – average household incomes less the tax that applies, average household expenses and average house prices.
House prices are determined by supply and demand; hence to reduce values you need to increase the supply or lower demand and both are hard to do unless the economy collapses.
But a good economy can help people get higher incomes and that will help first home buyers. unless the Government increases taxes and therefore removes any benefit of earning more.
Creating an environment where more land is made available for the building new houses then the building companies are helped will help too, but they need to be building new homes that people want to live in – not shoe-boxes that could easily end up as slums.
Of course, first home buyers want affordable houses but for any Government to offer help for first home buyers they need to ensure firstly that people can earn good incomes without taxing them too much so when we keep hearing about the new taxes we are concerned that any help for first home buyers created by programmes like KiwiBuild are being eroded.
Then there are the banks – banks need to be comfortable to make low deposit home loans available for first home buyers. They are going to assess mortgage applications based on the people and the property, so they want to see that the people have the incomes to afford the repayments plus have a property that is in demand and therefore will hold its value.
How Are The Government Doing?
Our new Labour led Government promised help for first home buyers.
If you have been waiting for help you would not be too happy and given the progress so far it will be unlikely that there will be much improvement anytime soon.
It appears that they have underestimated the enormity of the issues.
KiwiBuild may help if it can get started, but most economists expect that it will take at least 4-years and a lot of extra money before we see any results. There is an expectation that incomes will rise especially within the public sector, but the new taxes being introduced could erode any increases.
Our advice for first home buyers is do not wait for any Government to “fix the housing problem” and instead make an effort yourself.
Any further help for first home buyers might be some time away yet.
Now It’s Time To
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Source: North West Mortgages
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