Monday, May 19, 2008

Government to spend millions to get National voters on top tax rate into first home

Poor one income families on $85,000 who can't budget enough to scrape 5% of a deposit on a house are to get an interest free loan of up to 30% of the value of their first house if they live in Auckland, and lower if they live in selected areas outside Auckland.

How many will this policy assist? Well, not many if the price of houses doesn't drop substantially. There's not going to be enough houses for sale in Otara, Naenae and Porirua for people who'd want to park their two nice cars in the garage, not on the street. These houses won't have double garages as regional house cap prices are Queenstown $385,000, Auckland $305,000, Wellington $260,000, Christchurch $255,000 and Nelson $240,000.Anyone tried to buy a three bedroom house in Auckland for less than $300,000, even without a garage? The only place you can get a house in the greater Wellington area for less than $260,000 this weekend is in Porirua or Naenae.

Here's how this scheme may work: You're on a low income - say $45,000. You find a little house in Naenae for $250,000. The Government contributes 20%, you contribute 5%. Mortgage is $187,500 and at 10% interest, fortnightly payment over a 25 year loan period is $790.00 -so you`re paying 60% of your net income in mortgage payments. If two years later you are forced into a mortgagee sale, the government gets its share of the capital gain. If there is no capital gain - say the house sells for $240,000, way under it's valuation, you are left with nothing, having blown $50,000 for no return - and so has the Government - all to assist a family that now doesn't have a house nor can they afford to buy one, but would have been able to keep their Government -funded one had they saved a bigger deposit to start with.

That's why only this scheme is for those - if one income families - on the top tax rate. Most families with children on an income of less than $45,000 wouldn't be able to afford the mortgage. Those without children may be a little luckier.

This policy is like enacting a policy for civil unions where only one couple gets a civil union. It will only assist a very small amount of middle income families - probably childless - who should have been able to save some money like others in their situation. They will probably be National voters waiting on a tax cut.




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