'Shouldn't be penalised': Petition to scrap house price caps for first-home buyers nears 600 signatures

Northland-based mortgage broker Sarah Curtis has set up a petition to remove house price caps across New Zealand.
Northland-based mortgage broker Sarah Curtis has set up a petition to remove house price caps across New Zealand. Photo credit: Supplied/Getty Images.

A petition calling on the Government to remove regional house price caps for first-home buyers is nearing 600 signatures.

First-home buyers wanting to get the First Home Grant and First Home Loan must ensure the price tag of the home is within the 'price cap' set for the region. From April 1, price caps for many regions increased. But for others including Northland, the caps remained the same.

Getting finance approved for first home-buyers only to find a lack of houses available to buy, last month, Kerikeri-based mortgage broker Sarah Curtis lodged a petition to scrap regional house price caps across New Zealand. Her initial target was to get 500 signatures. On Monday, the petition reached 584.  

"First-home buyers just feel lost...the petition is about making sure there's conversation around what first home-buyers actually need," Curtis said.

Following the Government housing announcement, Curtis says first home-buyers aren't feeling heard and feedback shows more Government support is needed.

Latest Quotable Value figures show the nationwide average house price is $913,209. In the Far North it is $608,823, $717,534 in Whangarei and $741,524 in Kaipara - significantly higher than the $400,000 price cap for existing homes in the Northland region. 

"I don't think people shouldn't be penalised because they're trying to buy a house that's too high than what the Government constitutes a first home-buyer should be buying," Curtis added.

Realestate.co.nz figures show the average asking price in Northland reached $751,670 in April, a 1.6 percent rise from March. The number of homes that came onto the market was down 17.7 percent month-on-month, at 306.  

Curtis says increased demand from Kiwis moving north is putting Northland's current low housing supply under even more pressure. 

Those moving from regions such as Auckland and Wellington were targeting the 'next tier' of homes that first home-buyers typically step up to, she said. This meant there were fewer homes for sale in the first home-buyer range of $400,000 to $500,000. 

"At the moment, people moving from the regions are buying in that $700,000 to $800,000 bracket, so the first home-buyers who would normally buy at that 'next level' and free up some of the supply at lower brackets are not doing that," Curtis explained.  

While price caps would be removed, Curtis is proposing that income caps ($95,000 for single buyers or $150,000 for two or more buyers) still apply. First home-buyers would also be required to have saved into KiwiSaver for three-to-five years, under existing rules.

As a basic rule-of-thumb, first-home buyers with no debts and average expenses could borrow around five times' their income, Curtis said. Removing house price caps would help more first home buyers access the First Home Grant and First Home Loan, with lending criteria acting as a ceiling on prices paid.

"As an individual, if you're earning $95,000 you have no debts and average expenses, you can potentially borrow $475,000...if you've got a 10 percent deposit [$47,500], that's going to get you a $500,000 house," Curtis said.

"As a couple, you can borrow $750,000: if you had a $75,000 deposit, you're buying an $800,000 house."

As rent and food prices make it difficult for many Kiwis to save a deposit, getting an extra $5000 or $10,000 under the First Home Grant is a huge help.

"For a lot of the people we're talking to, it's really hard to save a deposit so an extra $10,000 towards [the] deposit can make a really big difference," Curtis added.

Independent economist Shamubeel Eaqub said raising house price caps or doing away with them completely, is likely to increase demand, driving up prices further.

"Increasing the caps will boost prices of cheaper homes for sale - before a rinse and repeat increase of thresholds will be needed," Eaqub said.

Estimating First Home Grants account for around 10 percent of annual house sales, Eaqub suggests the First Home Grant instead be aligned to new affordable housing supply. 

"Otherwise, the policy will do what it has been doing, helping a few at the margin and forever chasing its tail, as the policy drives up prices but does nothing to build more affordable houses," Eaqub added. 

Confirming Northland's median sale price was $710,000 in March, increasing 26.8 percent  year-on-year, REINZ acting chief executive Wendy Alexander said this showed how quickly the listings shortage put upward pressure on prices.

For many first home-buyers, particularly those wanting to get the First Home Grant, Northland is now out of reach.

“Currently [in February] only 14 percent of properties sold were under the $400,000 house price cap for existing properties and under $500,000 for new builds, for the region, Alexander said.  

Aside from Northland, other regions where price caps hadn't changed include Queenstown-Lakes, Waimakariri District, Selwyn District and Christchurch City.

The petition which closes on June 1, is calling for price caps across the First Home Grant and First Home Loan to be removed. Curtis is also asking for requirements for signed building contracts to be reviewed, for those wanting to use the grant to build a home.

More information on the First Home Loan and First Home Grant administered by Kāinga Ora, is available here and current house price caps are available here.