As New Zealand considers Government handouts to help young people to buy their first homes, Australians are sounding a warning.
Millionaires, migrants and months-old babies have all applied for Australia's first-home ownership grant, raising eyebrows across the Tasman about plans to bring in assistance packages here.
Although few details of the plans have been outlined yet, Housing Minister Steve Maharey said at the weekend that the aim was to lower the cost of the initial purchase and ongoing servicing of loans.
Two Australian property specialists are warning New Zealand not to adopt a scheme similar to the Australian one, saying it has been a disaster.
Real estate ethics crusader Neil Jenman and property author Terry Ryder say the scheme cost A$3.8 billion ($4.19 billion) when it was given to about 500,000 Australians in its first three years and, even after overhauls, still has too many loopholes.
Australia's First Home Owners Scheme was launched in 2000 to offset the impact of GST. It offers a one-off A$7000 grant to bridge the affordability gap.
But Mr Jenman said the scheme had been widely misused and last year Australians were outraged when millionaires were found to be using the grant, in one case to put taxpayer money towards a A$6.5 million home.
'It is a known economic fact that a Government handout to large numbers of homebuyers merely increases the price of housing,' Mr Jenman said, adding that the scheme disadvantaged the very ones it was attempting to help.
Mr Ryder said the $7000 grant no longer bridged the home affordability gap for many first-time buyers because price rises meant the sum was too low, even in Hobart.
'Originally, there was no age limit for the grant but New South Wales had to legislate in 2001 to create a minimum age of 16 and others have brought in a limit of 18 years,' Mr Ryder said.
'Millionaires, migrants and months-old babies have all exposed loopholes,' he said.
'Buyers have used the grant to buy homes worth over A$1 million and migrants, who have owned multiple homes overseas, have received it.'
NZ Real Estate Institute president Howard Morley said his organisation had been pushing for housing assistance for years and he welcomed the Government's plans.
'A scheme that helps poor people get into their own home has got to be good for the country,' he said.
'Helping people get their foot on the first rung of the ladder of home ownership is the hardest part.'
NZ Real Estate Institute chief executive David Skilling also welcomed Government proposals for assistance, but said they should be broadened from the lower to middle-classes.
'Australia, Britain and the United States have a bunch of policies but New Zealand looks quite unusual in terms of having no policies to encourage home ownership,' he said.
Auckland landlords, however, have their doubts.
Auckland Property Investors Association president Andrew King warned against interfering.
'Without any firm idea of what they are proposing, I'm still not sure it will be good for the overall market. When governments interfere with any industry, it usually has the opposite effect to what they were trying to achieve,' he said, adding that buyer assistance schemes often pushed up house prices.
'A Government programme which matches financial contributions to people's own home ownership savings would be a better option.'
A report released in June by the Government's Centre for Housing Research said housing had become much less affordable in the past 15 years.
It was especially tough for tenants, making it harder for them to buy their own homes, the report found. A third of tenants paid more than 40 per cent of their net incomes on housing.
Anne Gibson NZ Herald
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