Finally, Some Relief for First Home Buyers!
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There’s been so much talk lately about the New Zealand housing scene finally starting to shift to a buyers market.
For first home buyers that have been longing to get into the housing market for what seems like ages, the Government’s recent announcement of the extension of its’ Kāinga Ora First Home scheme has opened up heaps of new opportunities. And with more stock on the market than the past few years combined, prices are finally plateauing and even dropping in some areas, so for the first time in a while things have started to look more achievable for first home buyers. However, with rising interest rates, changes to lending laws and stricter bank stress tests, it’s still a formidable and tricky scene to try and navigate, especially for the first time.
That’s where your Buddy financial advisor comes in, so we’ve put together an overview of the most important changes to the Kāinga Ora First Home scheme to help give you some clarity on the recent updates.
A hefty increase in house price caps
Kāinga Ora’s First Home Grant programme helps first home buyers that are eligible add to their deposit by making up to a $10,000 per person (or $20,000 per couple) contribution. How much you are entitled to for your First Home Grant is determined by how long you’ve been in KiwiSaver, and if you’re buying an existing property or a new build - chat to your Buddy advisor for more details.
In order to be eligible for the grant, the applicant(s) must meet the following requirements:
- You must have contributed at least 3% of your income to a KiwiSaver scheme for at least three years;
- You must be planning to live in the house for at least six months;
- You can have a maximum single income up to $95,000 or a combined yearly income of $150,000 or less (before tax) for two or more applicants;
- And you must be buying or building a house under the regional house price caps.
It’s that last point that’s most important, as prior to these changes the housing cap in Auckland was between $625,000 and $700,000 for existing properties and new builds respectively - and we all know that it’s virtually impossible to find any type of dwelling in the City of Sails for that price. But house price caps have been increased across the country which brings them in line with regional lower quartile house prices, after an extended period of unprecedented growth across Aotearoa's housing market.
In Auckland, the new cap now sits at $875,000 for existing properties and new builds alike, which is up from the previous $625,000 and $700,000. Across other major centers, the new price caps are as follows:
These revisions have already come into effect, offering a lot more realistic support to Kiwis trying to get into their first home.
No more house price caps on Kāinga Ora First Home Loans
Typically, a 20% deposit is required to be approved for a mortgage from one of the major banks, but with the pricing of most homes in Auckland that’s a substantial (and almost unattainable) amount for most New Zealanders trying to get into their first home.
That’s where the Kāinga Ora First Home Loan programme comes in, which helps eligible Kiwis to buy with as little as a 5% deposit. The NZ government underwrites the loan, and works through a special lending scheme with select providers to make this happen.
Buyers used to have to look at buying a house valued at less than the regional house caps mentioned above, but as of June 1, 2022 those limits don't apply anymore, which drastically increases the accessibility of this programme, and creates a unique solution for those who would otherwise struggle to meet standard borrowing requirements.
There’s some other criteria that’s worth keeping in mind which borrowers must meet in order to be deemed eligible, we’ve outlined the main points below:
- Income cap:
1. Have an annual income of no more than $95,000 (before tax) for a individual buyer; or
2. Have an income of no more than $150,000 (before tax) for a individual buyer who one or more dependents; or
3. Have a combined income of no more than $150,000 (before tax) for two or more buyers, regardless of the number of dependents - Minimum deposit - You will need a minimum 5% of the purchase price of the house you are wishing to buy.
- First home buyer - Or a previous home owner, in a similar financial position to a typical first home buyer.
- You must live in the home you are buying. A First Home Loan cannot be used to buy an investment or rental property.
- You cannot own any other property (this does not include ownership of Māori land)
- For further details on the programme and full eligibility requirements, check out the Kāinga Ora website.
Sound like home ownership could finally be within reach now? Your Buddy advisor can answer any questions you have, chat through your options and help you get the process underway! The best place to start is to book an (always free) consultation, where we can guide you through next steps and start turning your home ownership dream into reality. Click here to make an appointment.
