Got questions about the KiwiBuild scheme? We explain what it is and how it works.
KiwiBuild has garnered headlines and criticism in equal measure. We explain what the scheme is and how it all works.
First home buyers have increasingly been left behind in a market where average house prices have soared at more than 9% annually since early 2015. The $2 billion government scheme aims to alleviate some of this pressure by providing 100,000 affordable homes over the next decade.
The government buys houses off a developer’s plans for a fixed price. This not only locks in the price for a potential buyer, but also helps the developer. To get funding from a bank to get a new project rolling, developers usually need to have a certain number of properties already sold off the plans. Therefore, if a lot of their unbuilt homes are already snapped up, developers should, in theory, find it easier to get financing. The flipside is developers are then locked into building a certain number of cheaper houses.
The maximum price for three or more bedrooms is fixed at $650,000 in Auckland and Queenstown. Two-bedroom houses are capped at $600,000, while a one bedroom or studio is limited to $500,000. The maximum price is capped at $500,000 in other centres but, at this stage, there is no further breakdown based on bedroom numbers.
You have to apply to rent out or sell within the first three years, and you’ll lose 30% of the capital gains if you do. After three years, it’s fair game and you can do as you please.
Buyers must be New Zealand citizens or permanent residents and intend to live in the house for at least three years. Owners are allowed to rent out rooms in the house but they must still live there.
First-time buyers can’t earn more than $120,000 per annum as a single person (the limit for a couple is $180,000). Second-chancers (people who have previously owned a house but no longer do so) can only have assets worth $120,000 in Auckland, $100,000 in the major cities or $80,000 in other areas.
Half of the homes are set to be built in Auckland and the rest in other areas with high demand and affordability issues. Most are likely to be built in the main centres.
The plan is to build 1000 homes in the first year, 5000 in the second, 10,000 in the third before ramping up to 12,000 per year after that. When the scheme is going full bore it’ll need to deliver nearly 33 homes per day to hit these targets.
The government has admitted the scheme is already running well behind schedule. At this stage, only 47 homes of the promised 1000 have been built.