Progressive Home Ownership Helps Kiwis take their first step onto the property ladder

Finally buying and moving into your first home is a milestone many Kiwis dream about. Remember, however, that this will likely be the biggest and most important purchase you will ever make. There are many things to consider, but saving for your initial deposit is the first and usually most time-consuming part of this process.

As house prices have increased, many individuals and whānau who would once have bought a home have been priced out of home ownership. Only a select few very fortunate New Zealanders are lucky enough for the ‘bank of mum and dad’ to lend a hand. So, the New Zealand government introduced the Progressive Home Ownership Fund (PHO) to aid Kiwis to take their first step onto the property ladder.

What is the Kāinga Ora First Home Partnership Scheme?

The New Zealand government’s housing arm, Kāinga Ora, runs the First Home Partnership scheme. It helps prospective first-home buyers whose initial deposit and bank loan aren’t enough to buy a home that meets their needs. The scheme allows eligible first-home buyers to co-purchase their own homes in shared ownership with Kāinga Ora. It provides 25% (up to a maximum of $200,000) towards purchasing the first home for those eligible. 

Check out eligibility criteria on the Kāinga Ora website.

What exactly is shared ownership?

Sharing ownership or becoming ‘tenants in common’, as it is known legally, means you initially co-own a property in the form of defined shares. As a first home buyer, you are the majority owner of a share of the property and the occupier. The third party who purchases the home with you (in this case, Kāinga Ora) owns a minority share of the property and is listed on the property title as the co-owner. 

The makeup of the shared ownership is determined by several factors including,

• How much deposit you have?
• How much a participating bank is willing to lend? 
• The contribution Kāinga Ora makes towards purchasing the home with you.

Kāinga Ora provides the following example on its website: 

You may have saved 10% of the purchase price of a home, and a participating bank is willing to lend you 75%. Kāinga Ora then contributes 15% to purchase the home with you, in return for a 15% share of ownership in the home.

Obviously, the more you can contribute, the better, but you will need a minimum of 5% of the purchase price as a deposit for the home you are interested in buying. 

Are there any considerations that I should keep in mind?

Similar to a KiwiSaver withdrawal for a first home deposit, you have to live in the home as your primary place of residence for a set period of three years. So, you will need to ensure the home is one you are happy to commit to for at least this minimum period. 

Furthermore, because you are co-owners with Kāinga Ora, there are some minor hurdles to gaining consent when selling the property or making any improvements. 

You will meet annually with a Kāinga Ora Relationship Manager to review your financial circumstances. These meetings also track progress towards the end goal of buying out Kāinga Ora’s share within the first 15 years of home ownership. However, if this is not feasible, an alternative process occurs. 

For all further information, please visit the Kāinga Ora website.

How we can help?

If you think you meet the eligibility requirements and are excited to get a foot on the property ladder, AlexanderDorrington lawyers are here to help. We can provide the following services to ensure you and your whānau get the best start to shared ownership with Kāinga Ora:

• Help you consider whether the prospective home meets Kāinga Ora’s general requirements.
• Review your home loan pre-approval with a participating bank and ensure that the property, and sale and purchase agreement, meet their criteria.
• Disclose and clarify with you the terms of the shared ownership agreement.
• Ensure that additional clauses for off-the-plan and existing homes are included in the sale and purchase agreement to meet all of Kāinga Ora’s obligations. 
• Once you have a conditional or unconditional sale and purchase agreement, we can assist you with the conveyancing process, and Kāinga Ora’s requirements through to settlement when you will own the property. 

Gaining sound legal advice from the outset will give you peace of mind throughout any transaction. Our expert knowledge of property law makes AlexanderDorrington a good choice for your conveyancing needs. Particularly for transactions involving the Kāinga Ora First Home Partnership Scheme.

Call us on 09 375 2770 or email us at lawyers@alexanderdorrington.co.nz.

By Tom Phillips and Marina Sardelic