Housing crisis: How the new income and house price caps work

Kiwis earning higher incomes will now qualify for the Government's First Home Grant and First Home Loan scheme - but only in specific areas.

An increase in the income and price caps was announced on Tuesday, part of the Government's efforts to make it easier for first-home buyers to get into the market, after a year of massive price inflation. 

The First Home Loan scheme allows first-time buyers (and others in similar financial circumstances) to access loans with just a 5 percent deposit, rather than the usual 20 required by banks. The loans are underwritten by Kainga Ora, can only be used to pay for the house you live in, and incur a 1 percent mortgage insurance premium. 

The First Home Grant is a payment of $5000 per buyer of an existing property and $10,000 for new builds, as long as they've been contributing to KiwiSaver for at least three years.

The income caps for eligibility for both schemes are rising - from $85,000 to $95,000 for individual buyers, and from $130,000 to $150,000 for multiple (eg. couples). 

To get either the loan or the grant, the price of the house being purchased has to come in under a certain dollar value. In some regions they're staying where they were, and in other are rising.

In Auckland, the cap for a new build is rising from $650,000 to $700,000, and for an existing property from $600,000 to $625,000. 

In the Wellington region, including Hutt City, Upper Hutt City, Porirua and the Kāpiti Coast, the caps are rising from $550,000 to $650,000 for new builds and $500,000 to $550,000 for existing properties. 

In Nelson, Tauranga, Tasman, western Bay of Plenty and Hamilton, the caps are rising from $550,000 to $600,000 for new builds and $500,000 to $525,000 for existing homes. 

In Waipā, Hastings and Napier, they're going from $500,000 to $600,000 for new builds and $400,000 to $525,000 for existing properties; and in Waikato, from $500,000 to $600,000 for new and $400,000 to $425,000 for existing.

There are no changes to house price caps in Queenstown-Lakes, Christchurch, Selwyn, Waimakariri or the rest of the country. 

In Queenstown the caps will remain at $650,000 for new builds and $600,000 for existing properties; in Christchurch they'll stay at $550,000 and $500,000 respectively; and in the rest of the country $500,000 and $400,000. 

The changes will come into effect on April 1, Housing Minister Megan Woods saying they'll "help first home buyers into the market".

Since 2007 when the schemes were introduced, the highest house price caps have increased from $400,000 to $700,000 and highest income caps from $130,000 to $150,000. In that same time, the nationwide median price has increased from $348,000 to $780,000. 

The Government also announced a $3.8 billion 'acceleration fund' for new builds, an extension to the bright-line test, the removal of a loophole that favoured investors over owner-occupiers, and an extension to a programme to get more people into the construction industry.