In the year to date, the median prices paid by first home buyers for two or three-bedroom properties in Auckland, Queenstown and Wellington have been above the KiwiBuild caps. That potential “discount” from buying a KiwiBuild property makes it easy to see the scheme’s appeal to buyers, and that’s before you even factor in that a KiwiBuild property is new but there’s no guarantee of a new-build out on the open market.

One of the key talking points of the KiwiBuild programme is the price cap by bedroom number and location. Within Auckland and Queenstown, these are $500k for one-bedroom, $600k for two-bed, and $650k for three-bed (or more). Everywhere else, the cap is $500k regardless of bedroom count. So how have actual prices paid by first home buyers (FHBs) lately compared to those caps?

CoreLogic Graph 1
FHB median paid prices for 1-bedroom properties, YTD 2018 (Source: CoreLogic)

For one-bedroom properties (new or existing) in 2018 year-to-date*, across areas such as Waitakere, North Shore, and Wellington, FHBs have paid median prices below the cap (see the first chart above). A median price paid of $550,000 in Auckland City, however, is $50,000 above the KiwiBuild price cap for a new property.

CoreLogic Graph 3
FHB median paid prices for 2-bedroom properties, YTD 2018 (Source: CoreLogic)

The price cap starts to look more meaningful in the two-bedroom bracket in Auckland and Queenstown. (As shown in the grey bars in the second chart, FHBs have been paying prices above the KiwiBuild cap and could therefore find the scheme pretty appealing). In Auckland City, in particular, a new two-bedroom KiwiBuild property priced at a maximum of $600,000 would be of great interest compared to the $713,000 that FHBs have recently been paying for properties of more variable age and quality. Elsewhere around the country, FHBs have been paying the highest prices for two-bedroom properties in Wellington, but even there the median $496,250 is still slightly below the cap.

CoreLogic Graph 2
FHB median paid prices for 3-bedroom properties, YTD 2018 (Source: CoreLogic)

This cap could have even more effect in the three-bedroom bracket. Apart from Papakura and Franklin, prices paid by FHBs recently across different parts of Auckland have been comfortably above the KiwiBuild cap (refer third chart), with the same applying in Queenstown. Around the rest of the country, the three-bedroom bracket also sees the cap exceeded in Wellington and to a lesser extent Tauranga. In Wellington (KiwiBuild cap $500k), the median price paid by FHBs to date in 2018 for a larger property is $657,400.

Another interesting aspect to consider is new properties themselves. In Papakura, for example (where the McLennan KiwiBuild development is located), the median value of a recently-built three-bedroom property is $684,500. That is above the $650k KiwiBuild cap. But what is most interesting is that the McLennan properties are listed for $579,000 – about $105,000 less than the “market value”.

It’s important to bear in mind that these median price paid figures clearly relate only to FHBs that have already been successful in buying a property (whether that’s a new or older property). However, the aim of KiwiBuild is not so much to target or help those that can already afford property, but to ease the problems for people who’ve so far missed out.

Overall, the KiwiBuild price caps will have the most bite as the number of bedrooms in a property increases. Indeed, it wouldn’t be hard to imagine would-be buyers for larger properties in Queenstown, Wellington and parts of Auckland really jumping at the chance to get into a new KiwiBuild home. And although property values in Auckland and Queenstown have generally flattened off, continued growth in Wellington will only make the KiwiBuild appeal even stronger.

* Only areas/categories with at least 20 sales so far in 2018 have been included in this note.