Where in New Zealand gets the most First Home Grants?
New Zealand’s housing crisis continues to hinder efforts of young New Zealanders to get into a house. Affordability remains a key challenge for many areas, with house price growth far outstripping income growth over the past decade. There are some supports provided to enable young Kiwis into home ownership, such as the First Home Grant, but where gets the most support? As our analysis shows, Canterbury is the centre of New Zealand’s first home buyer support efforts, with a considerable level of First Home Grants going to purchases in the region.
Canterbury represents 36% of First Home Grants
Infometrics analysis of Kainga Ora Financial Products Quarterly Reports shows that Canterbury region has the largest number of First Home Grants provided of any region in New Zealand. Over the year to September 2021, there were 3,029 First Home Grants provided in Canterbury Region. Auckland region was second with 1,816, just 60% of the Canterbury total (see Chart 1).
Canterbury’s First Home Grant figures are quite remarkable. The region contributes more than double its fair share of Grants, with 36% of First Home Grants provided in Canterbury, compared to 14% of national property sales. This concentration of First Home Grants shows clearly that if you’re a first home buyer looking to utilise government support, Canterbury is the place to be.
Affordability sees other regions fall, as Canterbury nearly doubles Grant share
The number of first home grants across most of New Zealand has been falling steadily in recent years, and are down 30% from their peak. At the peak at the end of December 2018, 12,178 were provided across New Zealand, falling to below 9,000 in 2021.
Substantially higher house price growth in recent years has pushed home purchasing out of reach of many, with most houses rising far above the price caps allowed for to access the First Home Grant. The speed of house price growth in provincial regions and other main centres has been sharp, as Chart 2 demonstrates. New Zealand (excluding Auckland and Canterbury) First Home Grants have more than halved from their peak.
Canterbury and Auckland First Home Grants have meanwhile continued to rise, with Canterbury First Home Grants above 3,000pa and Auckland Grants above 2,000pa. The collapse in First Home Grants in most parts of New Zealand means that Canterbury’s share of total government first home buyer support is now considerable. Canterbury has nearly doubled its share of First Home Grants, from around 18% in 2016 to 36% in 2021.
Affordability and availability is key for first home buyers
For first home buyers looking to get into the market, affordability and availability of housing is critical to success. Canterbury is a clear example of these factors, with a larger level of responsive housing supply in recent years, and more houses that meet the First Home Grant price caps. Infometrics analysis of property sales data suggests that the proportion of houses sold in the last year that meet the First Home Grant cap was double in Canterbury what the national proportion was.
This trend is supported by the relativity of average house values in the area to the First Home Grant caps. In Canterbury, the average house value is around 130% of the First Home Grant cap for the region, compared to 200-220% for Wellington and Auckland regions.
However, just increasing the caps for First Home Grants in other parts of the country wouldn’t magically solve the problem. In Canterbury, there are considerably more lower-priced homes, with better housing supply than other parts of New Zealand. In more supply constrained areas, increasing the First Home Grant caps will only push prices up further as it promotes price growth from sellers who know that there is a $10,000 subsidy for the taking.
Buying a home is hard for many, and is going to get harder
Rising interest rates will be increasing what households need to put aside for mortgage repayments, of around a few thousand dollars extra a year. Tighter lending criteria will also limit the amount of new mortgage lending that occurs, with stricter loan to value rations (LVRs), possible debt to income limits (DTIs), and the updated Credit Contracts and Consumer Finance Act (CCCFA) increasing scrutiny of repayment ability.
Potential first home buyers still face a tough battle to get into a house. Buyers are looking at all the options on the table to get into a house, including requesting finance from the Bank of Mum and Dad and buying property with friends or other couples.
More limited lending choices will increasingly see potential first home buyers casting their net further afield to find more property options. Canterbury seems well poised to capture this increased attention.