Prime Minister John Key regularly says that throwing money at problems is not the solution.
Yet at least one of his ministers appears to think differently. Nick Smith who has yet to answer my email seeking assurances to the quality of steel being used in residential properties, has been flashing the cash big time by upping the ante on the HomeStart scheme.
The scheme offers grants of up to $20,000 to help “eligible” people buy their first home. This week he raised the annual income cap for someone wanting the grant from $80,000 to $85,000 ($130,000 for couples).
The value of properties the grants can be applied to has also risen, up $50,000 to $600,000 for an existing Auckland home, and $650,000 for a new home in the city.
Whether these grants really help homebuyers is a moot point. In business, the price of anything only comes down when people’s ability to pay is reduced.
Unfortunately, not one new home will be built as a result of this extra government cash. And despite talk of 400,000 new homes being built under the proposed Auckland Unitary Plan, we have neither the manpower nor the skills to increase homebuilding much above current capacity. We also want homes that last longer than five years without needing repairs.
And even if we were to attract the thousands of skilled people we need, where would they live?
Land Information NZ released its quarterly survey of homebuyers in New Zealand covering the three months to July 31.
When the survey was launched in October last year the Government suggested it would show how many offshore buyers were acquiring homes across the country.
However, the Government now says the data is not used to form a register of foreign ownership, but is collected for property tax purposes.
So while government says only 3 per cent of buyers are from abroad, what it really means to say is that 3 per cent of buyers pay tax abroad — and that tax residency is not the same as nationality.
For the purpose of establishing how many foreign nationals own property in New Zealand … the LINZ data is pointless.
Quotable Value says homes in Auckland now have an average price of $1 million, and that the national average is $600,000.
Andrea Rush of the part state-owned property valuation firm says Hamilton, Queenstown Lakes and Tauranga have seen some of the highest growth, and that values in Hamilton have risen 31.5 per cent since July 2015 — nearly twice as fast as Auckland’s 16 per cent for the same period.
However, during the past three months Auckland real estate has risen more than 5 per cent.
Rush says it is too soon to tell what impact the Reserve Bank’s 40 per cent deposit requirement will have on the market, but says investors have been backing out of buying property as a result.
Registered valuer, James Wilson says: “Increasingly we are witnessing unconditional offers being made in order to secure a property without completing adequate due diligence. This behaviour is driven by a growing fear of missing out which is rife across the market.”
For the first time in five years, the Auckland housing market is showing signs that prices may be plateauing, says Wendy Alexander, CEO of Barfoot & Thompson.
She says the average prices of property sold by the agency in July was $867,681, a fall of 4.5 per cent on June. However, the median price of $840,000 is the same as in June.
It is bad news for young first-time homebuyers as BNZ economist Tony Alexander tells them they will not buy at the same age as their parents and their debt will be larger — although interest rates will be lower.
Writing in his latest newsletter he says first-time homebuyers will typically live further from where they work, will on average take longer to move into the location they want, and will not shift overseas due to threats of terrorist attacks.