Price hike for 'affordable' homes

The new homes at the Hobsonville Pt housing development will cost between $450,000 and $550,000 when built. Photo / Dean Purcell

Government allows developers to charge more for each house to compensate for rising building costs.

The Government's much-flaunted affordable home build in Auckland has just become a little less affordable after developers were granted a series of price hikes.

The cheapest home now costs $50,000 more after the developers, Hobsonville Land Company, successfully argued that their material and labour costs were too much to bear.

It has also emerged that the development company sought even higher prices, but was turned down by the Government.

Building and Housing Minister Nick Smith said the Government had been open about the inevitability of increases.

But Labour's housing spokesman, Phil Twyford, said the increase was not fair as Kiwis simply could not save fast enough to get a foot on the property ladder.

The new "affordable" homes will now be priced at $450,000, $500,000 and $550,000, the last now in line with the Government's recently announced KiwiSaver HomeStart grants.

Hobsonville chief executive Chris Aiken said the price rises were imperative. "We had those prices nearly three years ago and we've been really challenged to keep them in the face of building cost increases. They're not geared to market, they're only geared to the cost of building these sorts of homes."

Mr Aiken said the company was on track to beat the 3000-home minimum for Hobsonville Pt, instead aiming for closer to 3500.

However, the price increase would not necessarily come into effect straight away, as there were still homes available in some precincts at original prices.

More than 130 homes had been built, he said.

Mr Twyford said the Government's actions with special housing areas had "completely failed" as it had built only 170 houses in 18 months.

"Especially when Auckland needs 13,000 every year just to keep up with population [growth] and there's an estimated shortfall that has accumulated over the last five or six years, according to the Reserve Bank, they say between 15,000 and 20,000 houses."

Mr Twyford also claimed the slashing of $3500 tariffs in the cost of building a first home announced in last year's Budget had resulted in savings of only just over $1000.

"And remember, house prices in Auckland have been going up $1700 a week, so that announcement they made in last year's Budget has had the effect of saving less than a week's house price inflation in Auckland."

The Government should heed the Reserve Bank's warning that the Auckland housing market was a threat to financial stability, he said, as skyrocketing prices had "huge economic and social consequences", including blocking a new generation from home ownership.

"This is the Government's flagship affordable housing programme and I think it's clear to everybody that it's not affordable at all."

However, Dr Smith said the Government had "made plain" that the cost of the homes would be adjusted in line with the construction price index, which had risen by an average of 4 per cent a year.

"The most important aspect of the housing equation in Auckland is supply. The one problem we're having in Hobsonville is that demand is such that the properties are being sold more than 12 months prior to purchase off the plans. To complete this development we need to keep it economically viable."