Mike's Minute: The great con that is 'affordable' KiwiBuild houses

Author: Mike Hosking,
Publish Date: Thu, 4 Oct 2018, 8:53AM

We may have discovered the crux of the Kiwibuild problem through some new figures from CoreLogic.

The median price paid by first home buyers for a home, for example, in Auckland, is $699,000.

Kiwibuild do them for $650,000, so yes a saving, but not a lot.

What we are discovering here, is that the government doesn’t appear to be able to do anything the market already isn't.

We also have new figures that show that a quarter of all home sales of late have gone to first home buyers. Thus indicating that if you're a first home buyer and you can afford a home, you are buying.

In Wellington the median number is $657,000. The top KiwiBuild price point in the capital is $500,000.

The theory that by building in bulk might trim the price is barely true. And that if you free-up vast tracks of land you'll get the land cheaper, therefore the final price falls, doesn't appear to be the case either.

So for those who fell under the Twyford spell that somehow thousands upon thousands of first home buyers locked out of the market would suddenly magically be able to afford a home, simply isn't true.

Kiwibuild is basically a reflection of the market already in operation. Do remember, not a single Kiwibuild home has been sold.

18 are due in the next month or so, but as these figures show at prices not a lot different to what other homes are already selling for.

The real issue here, and this has become clearer and clearer with time and experience, is not the price of the Kiwibuild home, but the affordability. At $650,000, you can call these homes anything you want. But affordable,for most, they are not.

And that is the political con in all of this.

As Treasury already told us months back, there are very, very few people comparatively who have the income to support the mortgage required to pay what is essentially a $600,000 mortgage.

Even at a 10 percent deposit, which Kiwibuild will allow, you still need close to $600,000. And to fund that even at 5 percent interest you need incomes well into the six figures to make it work.

So join the dots, the market price and Kiwibuild price aren't that different. A small percentage of people have the income to pay a mortgage of that size, so for those that do, they're already in the market and buying.

So what, if any, difference are Twyford's houses making? Are people locked out able to buy a Twyford house? No,they were locked out before, and they're locked out now.

Yes, he's adding to supply which is good, but that would have happened anyway. The cold hard facts, the median price versus the Kiwibuild price are exposing the rort.

They're not affordable, they are just another house.