Home ownership plan slammed

Afterall, in Australia where the government has been handing out lump sum contributions (starting at A$7,000 and rising to A$14,000) towards deposits of first home buyers, shows what a fillip such a move can provide an already sizzling housing market.

Official figures show the median house price in Australia’s major cities rose 18.4% in 2000 – Sydney’s median price has surged almost 80% in the past five years (of course, not all of that could be attributed to the first home buyers grant).

Quite a gravy train for real estate agents.

But Real Estate Institute of New Zealand (REINZ) national president Graeme Woodley is arguing against this country copying the scheme, even though that’s precisely what our government is currently looking at.

Acting Housing Minister Steve Maharey said, last week, that the government is keen to restore New Zealand’s home ownership levels which have fallen from 74% of the population to 68% in the last decade.

Schemes which might be included in the next budget include guaranteeing mortgages for those with no collateral, and offering suspensory loans, Maharey said. However, he ruled out returning to the days when the government was the major mortgage lender to families.

"We believe any scheme to encourage access to first home ownership should recognise the distortions any form of lump sum, or de-facto lump sum, scheme might cause," Woodley says.

"Lump sums by way of government funded deposits, or de-facto versions of lump sums such as guaranteeing mortgages for those with no collateral, is bound to cause distortions and could end up as another student loans situation," he argues. Any suspensory loan scheme would still have to be repaid some day.

REINZ has studied the Australian scheme and has concluded "such a scheme effectively removed part of the savings ethic while inflating housing demand, largely for the benefit of the home construction industry."

Instead, any government assistance should encourage people to use their own endeavours to achieve home ownership, Woodley says. He suggests the government provide incentives for saving a home deposit, with using tax deductibility as the most sensible approach. A scheme involving tax breaks "would require the potential home owner to make a contribution and a commitment."

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