Warriors 1st Grader
- Apr 20, 2012
The policy is only pretty recent and so the numbers are currently very few especially since they're still trying to sort out the teething problems. One estimate was that around a quarter of first home buyers will eventually use them.How much of the market is that?
There is around 110,000 house sales each year in NZ and, using the latest figures, 21% of those are to FHB. That would mean, the government would be approving between 5,500-6,000 share equity loans each year. Doesn't sound that many.... until you realise that's between 55,000-60,000 loans over ten years. If the average amount they loaned was 250K for $1 mill houses and the houses doubled in value before they were sold, just for the first years loans, that's $1.375 billion the government made without doing a thing. If those first year homes doubled in value and then doubled again, that's $4.125 billion in profit from the gain in the value of property if they were then sold in twenty years time.
However, if the house prices didn't double every ten years and say only rose 2.5% instead of 7.2% (average required for houses to double every ten years), the government's take drops to only $385 million after ten years and $880 million if the houses are sold after twenty years.
As you can see, it's in the governments best interests for the houses not to be sold but held on to as long as possible and for the housing inflation to be as high as possible even if only 5% of all houses sold use some money from share equity loans.