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Govt may raise KiwiSaver home buyer deposit subsidy if RBNZ introduces loan restrictions

Housing Minister Nick Smith has told TV ONE’s Q+A programme that the Government will review the current KiwiSaver maximum house price cap subsidy to better reflect the cost of housing, specifically in Auckland.

“We’ve had eight times the number of New Zealanders take their KiwiSaver – their savings, their employer contributions – pick up the Government’s grant and buy into the housing market," Dr Smith said.

"There are some things that we can do with KiwiSaver.  I’m worried that the income thresholds and household thresholds have not been shifted for some years, and as a consequence, that’s a barrier.  I’m having a fresh look at that, and we may make some moves in parallel with the Reserve Bank around where those thresholds are to make it easier for home buyers as we try and deal with this bigger problem."

The Reserve Bank is currently reviewing its options in efforts to try to cool Auckland’s housing market. It’s proposing introducing a loan-to-value ratio (LVR), forcing banks to restrict the number of loans it approves with deposits less than 20%.

Dr Smith told political editor Corin Dann that the Government had made it clear to the Reserve Bank that “home ownership’s a really important issue for us” and he was confident that “we’re going to get a package that works well for both the NZ economy and for those aspiring young families that want their own home”.

The Minister says that Aucklanders, in particular, found it difficult to access the start-up help for Kiwisaver because the price cap subsidy was restricted to houses $400,000 or less.

“I’m having a fresh look at that.  I think it is important that those levels are realistic and need to respond to some of the changes that have occurred in the market. KiwiSaver, of course, helps the concerns that the Reserve Bank Governor has, because he’s worried about people going in with zero, 5% – very low deposits on homes.  If we’re able to get KiwiSaver working, get people’s deposits built up, then he is comforted by the fact that there are less of those very risky mortgages – 95%, 100%,” Dr Smith said.

Bankers Association raises loan shark fear
Meanwhile, the head of the Bankers’ Association, Kirk Hope, has expressed concern that if the RBNZ introduces loan restrictions it will simply force desperate house buyers and small businesses to borrow off higher interest rate lenders, or loan sharks, to build the required deposit.

“It’ll not just be first home buyers, but it might be small businesses that are trying to access additional capital.  High LVR loans will reduce from around about 60 per cent, so what you’ll see is quite a reduction in the demand by restriction for those types of loans,” Mr Hope says.

“What you’ve seen in places like Canada, who have applied these caps, and Sweden, where these caps have been applied as well, is those first home buyers accessing the unsecured lending market to get the value of the deposit.”

Mr Hope says the RBNZ needed to justify why imposing a loan-to-value ratio tool was necessary.

“For example, we’re seeing lending flows declining, high LVR lending flows declining for the last quarter, housing approvals are declining, the rate in growth of housing approvals is declining, so all the figures are pointing to much more than just a seasonal change.  So what we would want to see out of the Reserve Bank is much more justification,” Mr Hope says.

Mr Hope says he would support the Government raising KiwiSaver access to help first home buyers in tandem with any LVR restrictions imposed by the RBNZ.

Comments and questions

Why doesnt the RBNZ just build in an expemption for first-home buyers?

This is creating needless complexity. Why do we have turkeys running the country?

Quite obviously, because it's pointless introducing price calming strategies if you undermine it with a major exemption.

The only reason to exempt first-home buyers is political, not policy.

But the government is proposing a scheme which would do just that...

And, no, the reason to expempt first-home buyers is because they are not soley responsible for the housing bubble, (try property investors and 2nd home buyers, etc) and, secondly, it's in the public interest to help people out of rented accommodation and into home ownership to realise the Kiwi dream.

No-one is 'solely' responsible for the situation, it's a combination of demand across the entire market. First-home buyers have no moral right to any taxpayer handouts, in my view - certainly, not so we can subsidise your 'Kiwi dream'. My Kiwi dream is a more stable financial position as a country (including the government's finances), so I'd prefer it if us taxpayers didn't go and drop money on your deposit so you don't have to work as hard as the previous generation. And before you cry about it, I only bought my house about six years ago at the aged of 32, so I am not a baby boomer.

That's where you got it wrong, anon. The previous generation did get help from the state to buy their homes. Even Paula Benefit got her house with the help of the state through cheap loans.

This is so utterly stupid and venal. Both parties are now trying their best to look tougher and more on the side of first-home buyers, and doing everything they can to get those votes votes votes! Never mind that getting these sub-prime home buyers loaded with debt to acquire massively overpriced houses is a pretty bad idea - hmmm, the rest of the world had a problem with this? Never mind that you are potentially screwing those very same home buyers and the rest of the economy - never mind, as long as they get votes. What is worse is that at least the National Party knows they are doing this, and don't care.

What if they don't get those votes and the Greens end up as the dominant party in Government. How screwed would the economy be then?

I'll be interested what this government will do for first-home buyers. Hopefully, it won't be just another one of their tinkering policy to con the voters in to believing that they are really doing something for them.

By 'government' I assume you mean us taxpayers? Why should we subsidise your house? You should work for it like we did when we were younger.

Call it what you like. I rather see my tax money going towards subsidies for NZers who need help than those multinational companies like Warner Brother's and SkyCity Casino owners, who are just greedy.

You can't take your house and money to your grave. So share the love.

I am working for my deposit, anon. Already have 30K and working hard to save a lot more. I bet you had top save, what, 10-20? Pfft, easy. You got an easy ride so can't talk. 20% of a modest house in Auckland is around 100k. I bet your 'working hard' wouldn't have raised that.

Yeh, yeh, sounds good and should be reviewed as a matter of good financial management. But, on a less than average Auckland home at say $450,000 the difference between a 5% deposit of $22,500 and $90,000 at 20% is not going to be resolved by any KiwiSaver tweaks.

Get real, shift some of the demand from existing to new, legislate for all overseas residents (except Aussies because of CER) to buy only new properties and all must be occupied or tenanted. No vacant absentee property owners - even Shania Twain can pay someone to live in her Kiwi bolt hole.

Big problem in Sydney that one. Over 10% of all Sydney homes are not lived in. Read Chinese buyers.