Recently the criteria to buy a house on the Kiwi-Build scheme was announced. Whilst a welcome step forward in making housing more affordable for New Zealanders, the data on which it was planned and the plans derived from it pose some serious questions about the realism of the whole scheme.
A good example is the suggestion that the upper income level of a couple seeking a Kiwi-Build home may be as high as $180,000. This is quite absurd when one considers the current pay most professionals take home – the graduate incomes for a few professions are listed below:
- A newly graduated police officer: $45,000
- A newly graduated nurse: $46,000
- Graduate resource management planner: $45,000
- Graduate primary school teacher: $43,000 / Graduate high school teacher: $45,000
- Graduate plumber: $39,000
- Graduate carpenter: $40,000
- Graduate electrician: $46,000
And let us be realistic here. Let’s say that a couple who have been in their respective professions – say an electrician and a high school teacher – for 5 years and are on $50,000 and $47,000 respectively. After paying 21% income tax and %17.5 they have $39,500 and $37,530. They live together and pay $250/per week in rent each or $13,000 in rent a piece.
After adding in $240 for groceries, power, phone and internet, running a middle age Toyota Corolla and a Ford utility that would be another $200 a week each.
They want a house, and are looking for something in the vicinity of $350,000-$400,000. If they put away $300 per week each to save for that house it will take them nearly 12 years to reach the bottom of that price range. Kiwi-Build houses for the most part seem to be priced at $500,000+.
Whoever came up with this inane idea that people can somehow afford this needs a reality check. After tax this couple are on a combined total of $77,030. After weekly expenses that drops to around $56,000. This couple have no kids to worry about at this stage. But in the real world many would have one or two children to worry about by the time they reach their 30’s, which tightens the wallet considerably.
The scheme has several failings. It fails to lock out those who have lived overseas for a long period of time and will have financial assets that they can draw upon to buy a house under the scheme. It fails to acknowledge an even more basic fact: Most New Zealanders simply do not earn that much and would struggle to make the starting gate on even a house at the bottom end of the spectrum.
A person on minimum wage in something like a supermarket job would be on $16.50 per hour and have to pay 17.5% tax. I will assume for the sake of this argument that they pay 3% into their Kiwi Saver, which would leave them with about $13.11/hr after tax. That is about $681/p.w. Subtract $250/p.w. for rent and another $180/p.w. for all other expenses, that leaves $250/p.w. At best they might put away about $100-120 per week or about $6,000 per year. All of this assumes that they are single and have no dependents (kids/sick or elderly relatives).