The government's new housing fix-it package will do nothing to help first home buyers according to a market expert who says it time to go back to the drawing board.
The suite of changes includes doubling the bright-line test to 10 years and increasing the income and house price caps for First Home Grants and Loans.
Chief executive of First Home Coach Matt Taylor told Checkpoint the announcement is a missed opportunity.
"In a word, underwhelming," he said.
"It's a token gesture from a government where first home buyers have been waiting five long years for a review of these key assistance packages.
"They do make a difference, the packages themselves. But I just don't think the proposed changes go far enough to help first home buyers.
"The First Home grant and First Home loan have two key eligibility criteria. The first is around the income.
"The income caps were never really the problem. For 79 percent of our users on the First Home Coach platform where people can make their home buying plan… 79 percent of couples are already meeting, the previous $130,000 income cap.
"With the increase to $150,000 this will mean that 92 percent of couples will now meet that income criteria.
"The real grind comes where the government has continually set this house price cap well below where the market is priced.
"The previous cap of $650,000 in Auckland was set in 2016. Five years later we've now got a cap increasing by 8 percent or $50,000 to $700,000.
"Meanwhile median house prices in our largest city have increased 31 percent over that same period to $1.1 million."
That cap of $700,000 in Auckland is for a new build. For an existing house, the eligibility cap is $625,000.
Taylor said there is "not much" one can find in Auckland for that price.
"It's well out of the range where we're seeing prices now in market. The government had a key opportunity here to really make an impact for first home buyers. I just think they've missed the mark on this one."
For a 20 percent deposit on a home loan in Auckland with the median house around $1 million, a buyer will need "the best part of $150,000 as a deposit, to get your foot on the ladder," Taylor said.
"We're seeing increasingly the bank of mum and dad coming in and helping some people onto the property ladder. That can come in all shapes and sizes with loans, gifts, guarantees.
"That is increasingly, unfortunately becoming part of the solution."
The two key things in play are whether people can make the home loan repayments and if they can afford the deposit, Taylor said.
"What we're saying is people can absolutely make the repayments. That's basically what they're already paying in rent, if not a little bit less – they may be saving some money by getting a mortgage, which is kind of bizarre.
"But the big sticking point is actually getting that deposit together. We see first time buyers really relying on key policy from the government here, like the First Home grant to boost the deposit up.
"[The government] had a real opportunity today to make a statement. But I think they're really just paying lip service to first home buyers."
Taylor said he would have liked to see the house price cap raised to help first home buyers be eligible for the government's First Home Grant.
"If you had taken it all the way to $900,000 that would have seen over 88 percent of first home buyers actually becoming eligible.
"At the moment if you're leaving it down at $700,000, you're only seeing 43 percent of our users on First Home Coach being eligible for that key grant.
"So if it was me, and hats off to them - they're using the right tools here… it's just they haven't gone far enough on the house price cap."