Property market remains red-hot for first-home buyers

Realtor boss calls for "bolder" Budget 2021

Property market remains red-hot for first-home buyers

Despite the effort of the government and the Reserve Bank of New Zealand (RBNZ) to cool the housing market and support first-home buyers (FHBs) into homeownership, April data showed that the housing market remained red-hot for many FHBs.

In its Monthly Property Report for April, the Real Estate Institute of New Zealand (REINZ) showed that the real estate market remained busy despite tougher deposit requirements and property investors targeted with tax deductibility on interest scrapped and the bright-line test extended to 10 years.

In April, median house prices in New Zealand increased by 19.1% to $810,000 – albeit down from March's record. With REINZ noting “lack of supply still pushing up house prices,” nine of 16 regions hit record median prices, including Auckland now at $1,125,000.

Nationwide, the number of residential properties sold was the highest for an April month in five years, although down from March. Meanwhile, the median number of days to sell decreased five days to 29, the lowest for an April month since records began.

Century 21 New Zealand owner Derryn Mayne commented: “Despite the government and Reserve Bank's cooling measures in place since March, April's numbers show the housing market remains too hot for most young Kiwis. Eyes will now be on Budget Day to see what action will be taken for desperate first-home buyers.”

“Sure, the government has tinkered with the price caps and income thresholds of first-home buyers applying for HomeStart Grants and First Home Loans. However, more now needs to be done if the Finance Minister is to ‘tilt the balance more towards first-home buyers’ as he has long promised.”

Mayne is calling for the Budget 2021, to be delivered on May 20, to deliver bold measures to turn renters into owners.

With low-interest rates, the realtor boss claimed that “there's no use bringing back low-interest ‘state advances’ loans. The government, however, could establish partnership models such as ‘rent to buy’ schemes or act as a guarantor for eligible first-home buyers' borrowing.”

Mayne also suggested interest-free government loans for deposits on first homes, with borrowers paying them back over time via Inland Revenue.

“Those in tertiary study can get interest-free student loans as education is rightly seen as a good investment and asset. That same logic could be applied here,” she added.

Many young people currently paying high rents could easily service a mortgage, Mayne said. Still, they cannot break into the market because they do not have enough deposit or a bank would not back them because they are self-employed or down to one income with pre-schoolers.

“No one's calling for a handout, but a serious hand up with a deposit, the state backing prudent borrowing, or the opportunity to gain gradual ownership via a community housing provider, are the kinds of bold things that will make a real difference,” Mayne continued.

“We all know property ownership is a huge advantage for Kiwis at the end of their working lives. It will take enormous pressure off future generations of older New Zealanders. We now wait to see if the government agrees that more first-home buyers are important to the country's wellbeing.”