The Government’s HomeStart grant came into effect yesterday (1 April 2015) meaning eligible home buyers can now receive a grant of up to $10,000 per person (or $20,000 per couple providing both are in KiwiSaver) when they purchase a new home. The criteria have been publicised for some time now and these include the requirement that the individual has contributed to KiwiSaver for three or more years; is purchasing their first house (not a rental), and have an annual income below the designated threshold ($80,000 for an individual, $120,000 for couples). More information on the HomeStart grant can be found on the Housing New Zealand website).
While this package will be welcomed by first home buyers, is it really a pragmatic solution to the housing shortage given the current housing market?
We have previously written about whether the issue lies primarily in the supply of, or demand for, housing (for example see Solution to housing in NZ). Increasing the money first home buyers have access to will fuel the demand side of this equation.
In saying this, the policy should not be looked at in isolation and there have been other developments at central and local Government level that are aimed at increasing supply (for example the housing accords). However, in an already overheated residential housing market it is hard to see how this announcement will cool the overall market sentiment.