13 Dec 2021

First Home Grant price cap changes won't come into effect until next year

8:10 am on 13 December 2021

The planned overhaul of First Home Grant income and property price caps won't happen until the New Year.

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Photo: 123rf

The grants offer up to $10,000 towards a buyer's first home or $20,000 for a couple.

The number of grants approved this year is on track to be the lowest since the scheme began, despite a lifting of caps in April.

Little has changed since then with just 8283 grants paid out as of the end of October, with just two months to go and significantly short of the 13,978 grants approved last year.

The lowest number before this year was 2015, with 11,665 grants approved, which was the first full year of the scheme being implemented.

For example the cap for a new build in Auckland went up to $700,000 and $650,000 in Wellington.

In August the government admitted it had got the caps wrong and promised an update in a couple of months.

Housing Minister Megan Woods said the policy work was now ready to go to Cabinet for approval.

"There has been a bit of delay with some processes this year, obviously we've had a lot of Covid papers through, so that will be up early in the new year," she said.

Woods said if proposed changes are approved by Cabinet, the caps will be reviewed much more frequently.

"The way it has operated in the past is that it is a decision that has to go to back to Cabinet in an ad hoc way, I've wanted to look at a way that we can regularise that more.

"[We've] done the policy work, but importantly what we've also done has been liaising really closely with the banks and with the commercial lending banks, to make sure the product we are developing is also going to be lendable from their perspective," she said.

National's deputy leader and housing spokesperson Nicola Willis agreed the scheme needed to change.

"These grants, which used to be available are now completely out of step of where the market is. The government was warned at the time that the changes they had made wouldn't be sufficient, they ignored these warnings and now here they are playing catch-up.

"Frankly, it's too little too late," she said.

Willis didn't want the government waiting until the new year either.

"The government should be moving with much more urgency given the promises it has made and I think it is a kick in the shins for first home buyers to learn that this isn't even a priority for the government, they're leaving it until next year."

First Home Buyers Club's Lesley Harris questioned why the government is bothering with caps at all.

"Why can they not just purchase what they can afford to borrow? Why should they be penalised because they're purchasing something that may suit their requirements better in terms of family size or location of work?"

Harris wished she could be upbeat about the changes, but said with sky-high house prices, tighter lending requirements and rising interest rates, first home buyers will continue to be squeezed out of the market.

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