Housing Minister Megan Woods says caps on the Government's First Home Grant scheme might soon be indexed to house prices, to stop them becoming obsolete so quickly.
First-home buyers qualify for up to $10,000 when buying places under a certain dollar value, which varies from region to region.
But house prices have been going up so fast recently, there are often few that qualify. The caps are based on the median figure in the lower-quartile of recent sales - the bottom eighth of properties. The Government revealed the latest caps in March, and a Newshub investigation found slim pickings in most of the major centres.
"There are some opportunities at the lower end of the market," Woods told Newshub Nation on Saturday. "I opened some KiwiBuild opportunities here in Auckland that have been sold this week. But look... I think that the price caps, very quickly, get out of date."
The cap in Auckland is $700,000 for a new property or $625,000 for an existing property - which are unaffordable by the traditional measure that the average value should be about three times the average household's income.
"I think if you have a look over those long-range datasets that you will have seen, that in New Zealand, if you take the international best practice of multiplier of three, we haven't had that for over 20 years," said Woods.
Even in New Zealand's most affordable major market - Christchurch - the multiplier is six.
Rather than do something to bring prices down, the Government is hoping to "flatten the curve", Woods said, borrowing a phrase you'd recognise from the early days of the COVID-19 pandemic. Then it was a strategy to keep COVID-19 infections low enough so they didn't overwhelm the health system - now it's keeping rampant house price inflation in check.
"What we are seeing coming out of Treasury forecasts and also Reserve Bank forecasts is actually we're going to see a flattening out. And that was our first job. We had runaway inflation last year in house pricing. Our first job was to flatten that curve."
If it doesn't flatten, rather than occasionally update the First Home Grant caps, Woods wants them to go up automatically.
"At the moment, you have to go back and get them raised by Cabinet. I actually think we want to look at some indexation. I'm looking at it and seeing whether that would be possible."
More work is needed on the policy, she said, but it's likely to link the caps to the House Price Index, run by CoreLogic, which went up 18.4 percent in the year to April.
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