Prime Minister Jacinda Ardern has hinted the Government is looking into ways to help first-home buyers onto the property ladder by tinkering with the restrictions of its home-buying subsidy scheme.
It comes as her government continues to come under pressure over New Zealand’s red-hot housing market, which continues to soar as the rest of the country grapples with a recession.
The debate has got so heated that National has explicitly called for the Government to “rein in the Reserve Bank” – something that explicitly challenges the central bank’s staunch independence from ministers.
Ardern this morning challenged this thinking, calling it “concerning” as she said there are very good reasons behind the separation between the Reserve Bank and government.
For some weeks now, Ardern has been pressed on the issue of housing – house prices are up close to 20 per cent year on year, according to the Real Estate Institute’s (REINZ) House Price Index.
While facing questions this morning, Ardern revealed the Government was looking into adjusting the thresholds around the home-start grants to make it easier for first-time buyers to get into the market.
The home-start grant enables first-time buyers access to $5000, or $10,000 as a couple, towards their first property.
There are a number of restrictions at the moment – including an earning limit of $85,000 per person, or $130,000 for a couple.
Ardern wouldn’t say which areas of the eligibility requirements might be shifted, but she was clear that the Government was exploring making some changes.
“Those are a good place for us to look at and say ‘are there ways that we can enable more first-home buyers the use those products?’ and that’s one of the areas I have asked for advice around.”
When it comes to deposits, Ardern said she was looking at “all options”.
She was particularly worried that increasingly, the difference between first-home buyers getting onto the ladder and those locked out was whether or not there is parental financial support.
“That’s not the kind of divide we want in New Zealand – it’s not who we are; we want it to be an accessible market.”
Ardern’s comments regarding the home start grant would come as welcome news to the Real Estate Institute of New Zealand (REINZ).
The body has called for the government to review the thresholds for the home start grant following the rapid pace at which house prices in New Zealand have grown.
Chief Executive Bindi Norwell said with house prices having risen by 20 per cent over the last year alone, “it’s our view that the caps should be reviewed in order to help first home buyers”.
There is a general consensus with economists that the reason for the unprecedented surge in house prices is due to the rock-bottom interest rates, set by the Reserve Bank.
Another key factor is the amount of liquidity the central bank is pumping into the market with its $100 billion bond-buying scheme – this is often referred to as quantitative easing, or money printing.
National’s shadow treasurer Andrew Bayly this morning went as far as saying the Government needed to “rein in the Reserve Bank now”.
“National is calling on the Government to temper the Reserve Bank’s latest inflammation of the property market by sending a letter of expectation to [Governor] Adrian Orr immediately.”
Bayly said the Government should require the Reserve Bank to earmark the $28b that it’s pumping into the banking sector to flow into productive parts of the economy, such as building new houses and local businesses.
But by law, that is not how the system works – the Reserve Bank Act gives the central bank complete autonomy, meaning it does not have to listen to the Government.
Ardern said National’s calls were a “significant departure for a political party in New Zealand to move away from what has been long-term consensus around the separation between politicians and the Reserve Bank”.
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