Squeezed first-home buyers to get help

Tens of millions in Government aid will be targeted at young low to middle-income families with children to help them buy their first homes.

But there is concern it will not be enough to avert the emerging housing crisis.

Nearly three-quarters of households owned their own homes a decade ago - a world high. But now the figure has plummeted below two-thirds, trailing other English-speaking nations and threatening the economy.

Housing Minister Steve Maharey told the Herald on Sunday this year's Budget package would enable Housing New Zealand Corporation to help with mortgages for those starting their families.

Up to 10,000 families stand to benefit from what Mr Maharey described as "seriously expanded" new aid, beyond the tiny Kiwibank mortgage insurance scheme.

But David Skilling, executive director of the privately-funded New Zealand Institute, said the country was facing a "first-order problem" extending into middle New Zealand.

"Especially in Auckland and the big centres, you can be earning way above the median household income and it's still difficult to get into your first home," he said.

"The response the Government is considering isn't going to do a lot to assist those people."

Auckland median house prices, which are worst affected, have skyrocketed by 67 per cent in the past 10 years, pushing them to $375,000 at the end of last year.

But Auckland salaries have increased by only 25 per cent in the same period, and still less for the younger workers who are desperate to get their first home.

Mr Maharey and Finance Minister Michael Cullen are to begin meeting officials as soon as they return to Wellington next month, making it their priority to hammer out the programme's details.

"One important caveat is that the work done shows it's not possible to return to mass assistance into home ownership," Mr Maharey said.

That ruled out an across-the-board low-interest mortgage product, or a cash grant to all first-home buyers as introduced across the Tasman.

"It won't be an Australian-style programme where we dump lots of money in and everybody gets a chunk," he said. "In Australia they effectively inflated the whole property market."

But the ministers have taken advice from the British Government about subsidising interest payments on mortgages, where home-buyers meet income limits and family criteria.

Mr Maharey ruled out a blanket law change allowing families to capitalise their family assistance payments, as was allowed in the 1970s, but he would not rule out targeted use of capitalisation.

He wanted to avoid the problems of the 1970s, and more recently of the 1990s Homestart programme, where low-income families had been helped into homes but were then unable to afford the repayments.

While young New Zealanders in the other big cities were borrowing an average $150,000 towards their first homes, in Auckland they had to borrow more than $200,000.

- HERALD ON SUNDAY