Brought to you by Senior Research Analyst Wayne Shum

The New Policy

The Government has established a series of funding assistance initiatives for First Home Buyers through Kainga Ora by offering First Home Grants and First Home Loans. Whilst such funding schemes are a positive way to encourage and support the transition towards home ownership for First Home Buyers, there have been assertions made by various commentators that the current price cap settings are not realistic, especially in New Zealand’s largest housing market, Auckland.

So how many homes falls under the price caps in Auckland?

Valocity wanted to investigate this, so using our valuation models we have analysed the number and types of homes falling under the Auckland Price Regional Price Cap of $625,000 for an existing property and $700,000 for a new property.

The Criteria

To qualify for a First Home Grant, the following criteria needs to be met:

  • Have been making regular KiwiSaver contributions for 3 – 5 years
  • Buyer to be over 18
  • Have earned less than the income caps in the last 12 months
  • Not currently own any property, this does not include ownership of Māori land
  • Have been contributing at least the minimum amount to KiwiSaver (or complying fund or exempt employer scheme) for 3 years or more
  • Purchase a property that is within the regional house price caps
  • Agree to live in your new house for at least 6 months

The buyer may qualify for a single payment of up to $10,000.

To qualify for First Home Loan, the following criteria needs to be met

  • Have earned less than the income caps in the last 12 months
  • Purchase a property that is within the regional house price caps
  • Agree to live in your new house
  • To pay a Lender’s Mortgage Insurance (LMI) premium of 1% of the loan amount

The buyer may qualify for a mortgage with only 5% deposit, subject to lender approval.

Both these policies require the property to be below regional price caps. A New Build is defined as newly built dwellings that received a building code compliance certificate less than 12 months ago.

Region Existing/older properties New properties
Auckland $625,000 $700,000
Queenstown-Lakes District $600,000 $650,000
Kāpiti Coast District, Porirua City, Upper Hutt City, Hutt City, Wellington City $550,000 $650,000
Hamilton City, Tauranga City, Western Bay of Plenty District, Waipa District, Hastings District, Tasman District, Napier City, Nelson City $525,000 $600,000
Waimakariri District, Christchurch City, Selwyn District $500,000 $550,000
Waikato District, Dunedin City $425,000 $550,000
Rest of New Zealand $400,000 $500,000

Number of individual properties under the price caps

Region Existing eligible homes Percentage of all existing home stock Eligible New Builds Percentage of all new build stock
Auckland                  22,084 14%                        965 23%
Franklin                    2,458 19%                        111 18%
Manukau                    4,994 5%                        800 25%
North Shore                    1,337 2%                          62 4%
Papakura                    1,731 10%                        552 33%
Rodney                    1,528 4%                          65 3%
Waitakere                    1,946 3%                        331 11%
Grand Total                  36,078 8%                    2,886 18%

Make-up of the eligible homes

In total there are approximately 36,000 homes falling under the Auckland Price Cap. Approximately 15,500 of these comprise apartments located in Grafton and Auckland Central which have traditionally been targeted by investors to provide accommodation for tertiary students, or waterfront apartments aimed at those higher up the property ladder, therefore ‘appetite’ among first home buyers to purchase such stock may be limited.

Summary

  • Apartments generally have lower entry cost, but buyers must account for body corporate fees. Banks are generally less willing to lend on smaller apartments, or apartment blocks with a checkered history.
  • For First Home Buyers under the price caps still seeking the “quarter acre dream”, it is unlikely to be achieved in the Auckland Region except in the fringe suburbs.
  • Units, flats, or townhouses are the most common options for First Home Buyers under the price cap. They offer lower entry prices compared to free standing homes and provide a similar level of accommodation. The market is catering for these buyers, with the number of off-plan townhouse developments on the rise across suburban Auckland.

Appendix

Below are the top 25 suburbs by number of eligible new and existing homes.

Top 25 Suburb Eligible New Apartment Eligible New Dwelling Eligible New Unit / Townhouse Total New Eligible Home
Auckland Central 495 495
Papakura 35 58 257 350
Manukau 99 91 190
Takanini 4 143 147
Mangere 118 3 23 144
Onehunga 90 90
Glen Eden 78 6 84
Wattle Downs 82 82
Manurewa East 71 1 72
Papatoetoe 11 7 52 70
Mount Wellington 10 50 60
Avondale 53 6 59
Pukekohe 23 36 59
Hobsonville 53 1 2 56
Massey 16 39 55
Mangere East 43 2 6 51
Panmure 46 1 1 48
Grafton 44 44
Manurewa 18 26 44
Epsom 40 40
Wiri 21 16 37
Eden Terrace 36 36
Mangere Bridge 2 31 33
Otara 4 29 33

 

Top 25 Suburb Eligible Existing Apartment Eligible Existing Dwelling Eligible Existing Unit / Townhouse Total Existing Eligible Home
Auckland Central 13,634 109 13,743
Papatoetoe 57 36 1,528 1,621
Grafton 1,493 19 1,512
Pukekohe 44 664 530 1,238
Papakura 16 394 692 1,102
Waiuku 628 234 862
Otahuhu 42 58 756 856
New Lynn 263 2 484 749
Mount Eden 142 587 729
Manurewa 68 614 682
Eden Terrace 597 42 639
Mount Wellington 141 35 438 614
Albany 263 318 581
Mount Albert 410 145 555
Manukau 420 2 76 498
Clendon Park 317 113 430
Parnell 273 97 370
Mangere East 34 310 344
Grey Lynn 292 30 322
Glen Eden 145 5 162 312
Henderson 67 24 215 306
Flat Bush 116 3 178 297
Onehunga 133 1 158 292
Avondale 59 230 289

The suburbs can be divided into 2 groups:

  1. Outer suburbs such as Wellsford, Pukekohe and Waiuku. They are rural suburbs located over 50km from Auckland Central, where land cost is generally lower and allows for more affordable housing.
  2. Established suburbs such as Papatoetoe, Otahuhu and New Lynn that are currently undergoing gentrification. The Unitary Plan allows for more intensive developments than the previous District Plans, therefore we are experiencing a growing gentrification of brownfield developments in these suburbs in the past 5 years.

Location of the eligible existing homes:

Location of the eligible new builds: