Changes to KiwiSaver Homestart scheme will make homes more affordable: Smith

Cap will increase by $50,000 to provide for what Housing Minister calls $650,000 "starter home' purchases.

Housing Minister Nick Smith says KiwiSaver HomeStart loans will help more home buyers into their first homes.

Speaking to Jessica Mutch on Q+A yesterday, Dr Smith said that, from Monday (today), house price caps under the scheme would increase by $50,000 across the country, meaning the scheme could be used to buy houses worth as much as $650,000.

The deposit on such a home would now be made up by withdrawing $45,000 from their KiwiSaver account, being lent another $20,000 from HomeStart for a new home ($10,000 for an existing home) and an additional 10% for the deposit from the Welcome Home Loan scheme.

Dr Smith said $650,000 would buy people a “starter home.”

“I don’t think we’ll be creating the expectation that a person’s first home is going to be that gorgeous North Shore or Remuera home. It’s going to be a starter home.”

Dr Smith said the reason the Auckland housing market was overheated was that New Zealand is doing well and the country looks like a good place to live while the rest of the world looks “unstable, unsafe.”


  • $600,000 to $650,000 in Auckland
  • $500,000 to $550,000 in Wellington, Christchurch, Hamilton, Tauranga, Queenstown and Nelson-Tasman
  • $400,000 to $450,000 in all other areas

RAW DATA: Q+A transcript: Building and Housing Minister Nick Smith

Watch the interview here

JESSICA Welcome to the programme, Housing Minister Nick Smith. Thank you for being with us today.

NICK A Pleasure.

JESSICA I want to start off by getting some reaction from you to the previous interview by Phil Eaton. His comment was that the Unitary Plan will take about three to five years to kick in, to make a difference. Does that make you nervous, given we’re going into an election year?

NICK No, I simply disagree. If the Council takes the right, bold decision and replaces those old, confused plans – remember, the old plans that are governing development in Auckland are now 20 years old. They were for a population of 400,000 fewer. They make it a nightmare for those people that are trying to build houses. If the Auckland Council adopts the Unitary Plan as recommended by the panel, those new rules clock in in October. Now, there will be a pipeline from that time to when the architecture, design—

JESSICA So how long is that pipeline if it’s earlier than three to five years?

NICK Oh, my view is that there will be a market response as early as next year in terms of new projects coming on board. But is correct. 

JESSICA When will it make a difference, though?

NICK Well, if you look at the number of houses that were being buildt in Auckland when we came to Government at the GFC time, it had dropped down to about 10 houses per working day. Those figures out on Friday on building consents were actually very strong. They were at about 47 per working day. I think most people say we need to get it up near 60 to be able to get supply and demand back into balance. And that’s the point where we’ll start seeing the supply side response working and making homes more affordable for Kiwi families.

JESSICA So if this is kicking in, like you say, and trying to make homes more affordable, when will a first-home buyer be able to buy a home comfortably in Auckland?

NICK Well, today, I’m announcing significant changes to the Government’s HomeStart scheme. Now, this is a scheme where if people are in KiwiSaver, they’re doing their bit, they’re saving, that we provide them with a grant of up to $10,000 for a couple for an existing house or $20,000 for a new home. Now, that’s quite significant.

JESSICA And that’s to help them get a deposit?  

NICK Yeah, it is, because the hardest part for a young family trying to get a home is pulling together that money for a deposit. Now, remember, we also have the Welcome Home Loan scheme, which means you only have a 10% deposit. So for a family that has saved for five years on the average wage in Auckland, they will have $45,000 in their KiwiSaver account. The Government will give them another $20,000. Now, the problem with the scheme, actually, mainly in Auckland and also in other parts of the country, is that the house price caps at $550,000. There just isn’t enough product on the market for the scheme to be picked up.

JESSICA So if it hasn’t been working, do you think this small amount of money, this small increase, will actually make a real different?

NICK Well, actually, let me just go through the numbers. So, at the moment, we have helped 15,500 people across New Zealand get their first homes. I don’t accept it’s not working. What I’m saying—

JESSICA How many do you think will pick up this one, then?

NICK Well, we’re aiming to achieve 90,000 over the period of five years, so we’re doing two things. In Auckland, we’re living that price cap from $550,000 to $600,000, but we’re also lifting it to $650,000 for a new home. 

JESSICA Many people—

NICK And why this is significant – can I finish this, because it’s really important – why this is significant is that if you’re going to get the houses being built, you need to get the plan right, and there’s been a big debate about that. We’re getting to the end of the process. But we also have to get the investment. Now, for many of those apartments, townhouses, complexes, they won’t push the go button on the construction until they’re able to sell off the plans for 40% of those. Now, with the changes I’m announcing to HomeStart today, allowing those people to go up to $650,000 is going to help deliver the cash and investment to get the next phase right, which is construction.

JESSICA Well, what will that buy, then? $650,000 – many people watching this will think, ‘You don’t get much in Auckland for $650,000.’

NICK Well, let’s just be clear on the numbers. If you take $600,000, which is for the existing houses, where we’re lifting the cap, 25% of houses are currently at that port in the market. Now, a first home is not going to be in the million-dollar suburbs.

JESSICA But what will that buy them? What will $650,000 buy them?

NICK You need to go into the marketplace. But I had a look on Trademe last night, and the sort of price range of what you’ll get in that sort of range. But yes, it is a starter home. I don’t think we’ll be creating the expectation that a person’s first home is going to be that gorgeous North Shore or Remuera home. It is going to be a starter home.

JESSICA Is it realistic that first-home buyers are going to say, ‘We need to live in an apartment, in a townhouse.’ Do we need to have that mind shift? Do first-home buyers just need to get over themselves?

NICK No. It is tough for first-home buyers, and the Auckland market is particularly overheated. That is a consequence of New Zealand doing well. The rest of the world looks pretty unstable, unsafe. Our economy is doing well, so we’re attractive Kiwi homes. And the country is growing strongly, and this is a challenge that has arisen as a consequence of Auckland and New Zealand doing well. Now, the Unitary Plan – getting that right is a really important step. How long it will take to get the supply and demand into balance – my view is that we’re on track to do that by 2020.  

JESSICA Because one of the things to make that supply and demand is about building affordable houses, and one of the things that’s been taken out of the Unitary Plan is this idea that 10% of homes will be “affordable” – in inverted commas – if more than 15 are built. Why is that a) has that been taken off the table, and b) what’s affordable? 

NICK Well, the independent hearings panel did things on an evidence basis, on the basis of submissions. And they looked at the evidence, and they said this approach of trying to regulate house prices through the RMA doesn’t work. Well, a developer simply says, ‘Look, if I’m doing a 45-section, and the Council says I don’t have to have regulated prices if I do it in 15, I’ll just do it in three lots of 15.’ They’ll just get around it.  

JESSICA But how can you guarantee that those affordable homes you’re talking about, the $650,000 homes, are going to be there for Aucklanders?

NICK Because you create a competitive market. And I roll back to when I was interviewed on Q&A about the situation in Christchurch four years ago, when their housing market was under real pressure. Now, the government changed the planning rules. You can now get good-quality three-bedroom new homes in Christchurch for $430,000. In Christchurch in the last year, rents have dropped by 9%. House-price inflation in Christchurch has only gone up by 3%.

JESSICA But Christchurch is very different to Auckland. 

NICK Well, no, Auckland is larger, but it’s the same building materials, it’s the same building rates, it’s the same regulation. If we can get these planning rules right, we adopt the same approach we have in Christchurch, that growing supply is at the core of the solution, and equally so, it will work in Auckland.

JESSICA Are you confident that there are going to be enough affordable homes in Auckland for these first-home buyers to buy?

NICK Well, as a consequence of the government’s Home Start scheme that provides a financial incentive for the development sector to say, ‘Look, there is the opportunity for access to $430 million worth of government cash,’ that encourages them. And in my view, that carrot approach is far more effective. As the Independent Hearings Panel said, get the rules right, make it easier for people to build houses, and actually, that’s the best way of getting a competitive market so that we do have affordable housing in Auckland.

JESSICA With this plan, for the unitary plan that’s being discussed, how many homes do you think will be in that category that people can afford, the affordable first home?

NICK Well, I think, Jessica, that’s an unrealistic question for this reason – there are some families that can’t afford a $350,000 home; there're others that can afford a million-dollars home. Every person’s circumstance is different. What we need to do, and I think the unitary plan has done a good job of actually providing a wide range of different housing options from quarter-acre sections through to townhouses and apartments, and actually the way of which you get affordable houses as we have delivered in Christchurch – through getting the planning rules right. Look, this is the principle.

JESSICA But you are setting the benchmark, though, saying that $650,000 is an affordable home. That’s what you’re putting for the Home Start scheme. 

NICK No, what we’re saying is that we will allow middle-income earners – and I need to also say today we are raising income caps since we started the scheme, incomes in New Zealand incomes have gone up by 6%. So at the moment, you can only get access to the scheme at $80,000 income – we’re putting that up to $85,000; for an income on a couple, up from $120,000 up to $130,000. The aim of that scheme is to provide middle-income families into modest homes. And what I’m saying is that in the Auckland market right now, a modest home is under 650 grand; in markets like Wellington, $550,000; in markets for the rest of the country, $450,000.

JESSICA That’s a nice place to leave it. Thank you very much for being with us this morning.

NICK Thank you.

Tune into NBR Radio’s Sunday Business with Andrew Patterson on Sunday morning, for analysis and feature-length interviews.

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