The benefits and key facts needed to get on the property ladder
While the property market is a little more friendly towards first home buyers these days, it is still a struggle for many to take that first step onto the property ladder.
There are a number of schemes available to the first home buyer to make that first step a little smaller such as Kiwisaver, Kāinga Ora First Home Partner and Kāinga Ora loans. Additionally, a first home buyer may also apply for a Kāinga Ora First Home Grant.
First Home Grants are available to first home buyers on the basis they meet some key requirements. These include contributing to Kiwisaver for at least three years, having a qualifying household income, and the property in question having a purchase price that falls within the specified “caps” set by Kāinga Ora in each region.
On the basis that a first home buyer is eligible under the scheme, they may be entitled to different grant amounts depending on some key factors. If the buyer is looking at an existing home, they may be entitled to $1,000 for each of the three (or more) years they have been contributing to Kiwisaver, to a maximum of $5,000. If the buyer is looking at a new home, they may be entitled to $2,000 for each of the three (or more) years they have paid into the scheme to a maximum of $10,000.
This is a great way for buyers to increase their available deposit to go towards their first home, but as house prices increase, the purchase price ‘caps’ have been more and more restrictive to those wishing to access the grants for their first home. There are also other onerous restrictions which have barred some buyers from accessing this assistance.
First Home buyers will be pleased to see that following the government’s Budget announcement earlier in 2022, Kāinga Ora has made changes to the eligibility criteria for access to First Home Grants.
The changes were implemented largely in an effort to keep up and align with the ever-changing property market, especially in regions such as Auckland.
A key change has been amendments to the existing house price “caps” which were becoming increasingly restrictive to first home buyers hunting for their first property. Some notable changes to these house price caps are:
- Auckland house caps have risen to $875,000 regardless of whether the house is an existing property or a new property
- Hamilton caps have risen to $650,000 for existing properties and $725,000 for new properties
- Wellington have risen to $725,000 for existing properties and $925,000 for new properties
- Christchurch caps have risen to$550,000 for existing properties and $750,000 for new properties
The cap changes were not only focused in the main centres, with a number of other increases to caps in regional centres put in place to assist more kiwis into properties around the country. The full list of amended house price caps can be found here.
As well as the amended caps, other changes included adjustments to a person’s Kiwisaver contribution requirements to help reduce the amount of regular savings required to access the grant. You can review the full Kiwisaver contribution requirements here, but key points include:
- Minimum contribution is 3% of total income or at least $1,000 annually
- Contributions must be made from all sources of income, not just main source of income
- The three years do not have to be consecutive. They just need to add up to three years' worth of contributions
Additionally, a new income cap category has also been introduced for an individual buyer with dependents of $150,000 per annum.
First home buyers can also apply for the grant when looking to purchase a relocatable home, as long as it has received a Code Compliance Certificate in the last 12 months, subject to some requirements.
It’s just one option but if you are eligible, utilising a first home grant from Kāinga Ora is a relatively straight forward way to take advantage of the more affordable house prices in the current market and get on the property ladder.
If you are looking for advice on buying your first home, Haigh Lyon can assist you to make the process a little easier. Contact Shaun McGivern on @email or 09 306 0623.