Labour has finally abandoned its flawed KiwiBuild target. Is it the death knell for first-home buyers, or could there be a glimmer of hope, asks Olly?
It built houses where first-home buyers don’t live, like Wanaka, at prices first-home buyers can’t afford, like $650,000, so it’s no surprise Labour has abandoned its KiwiBuild target.
As of 3 September 2019 it had helped a mere 169 first-home buyers into their first house. [Source: kiwibuild.govt.nz]
As of today, the target of 100,000 KiwiBuild homes over 10 years is officially dead.
Perhaps it was naive to think it was possible to build 100,000 brand new homes in places first-home buyers wanted to live for prices they wanted to pay.
In its place we have KiwiBuild v2.0 – a pledge to build as many homes as possible. And monthly updates on progress.
The government will quit hundreds of unsold KiwiBuild houses in Wanaka, Canterbury and Te Kauwhata by listing them on the open market for anyone to buy.
It’s not likely to be investors buying them thanks to the war on landlords, so renters’ hopes of finding somewhere to rent will be dashed again.
But is there a glimmer of hope for first-home buyers?
Veteran investor Olly Newland gives us his thoughts…
“The government has scrapped the controversial KiwiBuild program and replaced it with a more pragmatic approach. In all fairness you have to give them credit for admitting their error with this policy and for trying to find a better way.
“Some of the points in the new policy can be questioned such as allowing first-home buyers only needing a 5% deposit in some cases. This could lead to some people ending upside down with the equity and borrowings as it only takes a small slip in property prices to cause havoc.
“The idea of having a rent-to-buy scheme is a good move if drawn up carefully, but there will be many questions to be ironed out first.
“For instance, can a buyer under that scheme pass on the deal to another deserving party?
“Or if the buyer sells on for a profit, how is that distributed?
“There’s the NZ First idea of the property being sold on the basis of splitting the land from the building and letting the buyer pay off one and then the other.
“There are other ideas that should be considered. Why can’t first-home buyers be given a GST rebate on new builds, thereby making the total price less of a hurdle? A $500,000 house has a tax component of $75,000 which is serious money.
“In Australia they do a similar thing with Stamp Duty, which makes a considerable difference for those trying to get on the property ladder.
“Another angle that needs investigation is whether mortgages can be non-recourse for some buyers. Non-recourse means that no personal guarantee needs to be given. At present all borrowers are personally liable for the loan, which is a big turn-off when borrowing very large sums.
“This would have to be rare and reasonable, as excessive non-recourse loans were the cause of the GFC when millions of people in the USA couldn’t afford the payments when interest rates ticked up.
“It would also be helpful if buying rental properties was encouraged instead of being made ever harder on the landlords.
“If people could rent for life then much pressure would be taken off the market and would be a great help to the deserving poor.
“We will have to wait and see how the new policy will work. The need for a solution to the housing problem is a very complicated task requiring some serious lateral thinking.”