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24th August 2014

Global Economy & Global Real Estate

N.Z.’s Key Offers $183 Million to Home Buyers in Election Pledge

Source: Bloomberg / Luxury

New Zealand’s government will provide NZ$218 million ($183 million) of subsidies to first-home buyers over five years if it’s returned to office at a Sept. 20 election, Prime Minister John Key said.

Subsidies for people buying new homes will be doubled to encourage housebuilding activity, and maximum home values eligible for the program will be raised to as much as NZ$450,000 in the country’s largest city of Auckland, Key said at the start of his National Party’s campaign. About 90,000 people will be eligible for the expanded programs, compared with about 50,000 at present, he said in the city today.

Key is going into the election with the strongest economic growth in seven years amid the NZ$40 billion rebuilding of earthquake-damaged Christchurch, surging dairy exports to China, and the strongest immigration since 2003. That’s driven the Reserve Bank of New Zealand to raise its key interest rate by one percentage point since March to 3.5 percent, increasing borrowing costs to the highest level since 2009.

“Home ownership is now more difficult” for young New Zealanders, Key said, according to a speech transcript. “It’s important for young people to get their foot on the ladder, and into their first home.”

The Nationals had about 50 percent support in a Colmar Brunton poll of approximately 1,000 eligible voters conducted for ONE News Aug. 9 to Aug. 13. No party has received an outright majority since New Zealand introduced a German-style proportional electoral system in 1996.

Slowdown Ahead

Key and Finance Minister Bill English, who have highlighted a return to surplus after six years of deficits, face a slowdown in growth over the years ahead. The country’s budget surplus in the 12 months ending June 2015 will be NZ$818 million, English said Aug. 19, compared with a May forecast of NZ$1.26 billion.

While investment in residential building jumped 11.6 percent from a year earlier in the first quarter, and house prices in the Pacific country rose 7.6 percent in July, home buyers in the country are the most pessimistic since 2007, according to an Aug. 15 report by ASB Bank Ltd.

-By David Fickling