With housing set to dominate the election campaign, mortgage advisers say certainty – not constant policy change – is the key to improving outcomes for Kiwi borrowers.
As New Zealand heads towards this year's general election, housing affordability and home ownership are expected to be front and centre in political debate.
And while parties will be outlining their plans to improve access to housing, as well as various tax options and lending rules, advisers are calling for the one thing that has been in short supply in recent years – stability.
“The government should allow existing policies to settle”
Hamish Patel (pictured, top), director of MortgagesOnline.co.nz, and Vijay Gounder, a mortgage adviser for Loan Market Remuera, agree that frequent policy changes create uncertainty for borrowers, advisers and developers alike.
So rather than introducing another wave of reforms, Patel says the government should allow existing policies to settle.
“We've already seen the changes in planning deliver a lot of new housing, and in the big city centres that's helped keep prices subdued – that's a real positive for first-home buyers, given the extra supply now available to them. But some stability in planning rules would help developers plan ahead," says Patel.
However, as developers continue to face rising infrastructure costs, council charges and water fees, Patel believes these will ultimately feed through into the price first-home buyers pay. “I'm not sure exactly what the fix looks like, but fewer planning rule changes – and more certainty about what's actually possible – would make a real difference.”
Gounder shares a similar view when it comes to investment settings. After years of adjustments to interest deductibility and the bright-line test, he believes the market needs consistency rather than another reset.
“What the housing market needs right now isn't another massive policy shake-up. Leaving the current tax and investment settings alone will give the market the stability it desperately needs to find a healthy, natural balance," says Gounder.
Targeted support could help more first-home buyers into the market
While stability is important, Gounder (pictured, right) believes there are still targeted policy changes that could make a real difference for aspiring homeowners. One of those is a review of the income caps attached to the Kāinga Ora First Home Loan scheme.
“The tight equity margins set by banks – even for a 10% deposit loan – put immense pressure on the average household budget,” he says. “The truth is that Kāinga Ora first-home loans are available to anyone with less than a 20% deposit, which means not all loans are underwritten at the minimum 5%. This should prompt the government to urgently review the current policy settings and income caps.”
Another beneficial policy change Gounder sees would be to reverse the decision to stop providing First Home Grants to first-home buyers.
“These grants were fundamental in helping people enter the property market who otherwise would not have been able to, essentially acting as the final bridge over the massive deposit gap.
“While the counter-argument is that the government is trying to reduce spending, the flow-on effects of homeownership could have highly positive economic impacts.”
Advisers urge a pause on regulatory change
Patel says the financial advice sector has undergone significant regulatory reform over recent years, much of which has improved professional standards. However believes a short pause to let the current regulations play out and prove themselves would be a sensible approach.
“I think the biggest thing the government could do for financial advice right now is ease off a little. Much of the regulatory change over recent years has been genuinely welcome, but it keeps coming, and that creates uncertainty.
“With constant fine-tuning, there's a real risk of ‘project creep’ – layering newer and newer requirements onto advisers over time. The practical effect is that it makes it harder for us to get out there and actually help people if we are constantly reviewing our processes and delivery methods.”
Professional advice remains an underused pathway to home ownership
According to Patel, one of the simplest opportunities to assist buyers is often of the most overlooked.
“Many consumers don't realise they can go to a financial adviser and, in most cases, get guidance on home ownership at no cost to them.
“A lot of information is available to the public, covering what's possible and what's not, and greater awareness of that would go a long way.”
Patel believes better promotion of professional advice – from the government – could help more first-home buyers understand what options are available before they begin house hunting. He says Financial Advice New Zealand's online directory is a valuable resource that more consumers should know about.
“These are all advisers who are committed to higher professional standards and pointing more first home buyers toward it would help them find advice they can trust.”
Advisers want faster progress on open banking reforms
Technology also remains high on advisers’ wish lists and for Patel, open banking represents one of the biggest opportunities to improve customer outcomes. But while it’s a great step forward in principle, he is still seeing reluctance from some suppliers to fully embrace the spirit of what it's meant to achieve.
“One of the key benefits should be instant access to a client's loan details made available to their adviser immediately, with the client's consent of course. And right now, we're still sending declaration forms and signed authority forms in some cases.
“This causes delays and when interest rates are moving, waiting several days for loan details from a lender just isn’t good enough in an environment where open banking already exists.”
Patel believes that better transparency and faster third-party access – always with consumer consent – would be a real win for everyone. And Gounder agrees, adding that open banking should be designed to support advisers rather than bypass them.
Gounder says: “The biggest thing the government can do right now is speed up the roll-out of open banking, but it needs to be done with advisers in mind. Right now, banks hold all the cards when it comes to data.
“A fully functional open-banking framework shouldn't just be an app-to-bank tool that cuts us out; it needs to be securely accessible to adviser CRMs. If we can pull a client’s verified financial data instantly with their consent, it eliminates the weeks of manual document chasing that bog down our pipelines.
“This will allow us to spend less time on administrative data-entry and more time on high-level strategy and client advocacy.”
A call for consistency and certainty top advisers' wish lists
Rather than dramatic reform, both Patel and Gounder argue the next phase of housing policy should focus on creating a system that is easier to navigate, more consistent to operate within and better equipped to help New Zealanders achieve sustainable home ownership.
“Right now, the settings we have in place are finally providing some predictability. For a long time, the constant tweaking of the bright-line test and the rolling back of interest deductibility created a lot of chaos and uncertainty for both investors and everyday buyers – it made it incredibly hard to plan long-term because the goalposts kept moving,” says Gounder.
“Adjusting these rules again right now would likely do more harm than good. If we roll back the current restrictions too quickly, it risks inviting short-term speculators back into the market, which could artificially push prices up before genuine, long-term buyers have a fair chance to establish themselves.”
