Many new homes currently offered for sale are bought straight off the plans. This often requires purchasers to pay a 10 per cent deposit into a trust account, where it sits until the home is completed and the new title is issued.
Subject to the size of the development and the stage it is at when the Agreement for Sale and Purchase is signed, buyers could be waiting a year or even longer before their new home is completed and title is issued. While anticipating the completion of their new home, many buyers use this time to save an even larger deposit toward their home.
The construction supply chain often encounters delays. Often a great deal of a developer's time is spent chasing after all the elements to ensure their project is approved, and then keeping it running efficiently once construction starts. There are several layers of complexity to building new homes, which probably count for how popular ‘turn-key’ developments have become. Remember there is just as much incentive for a developer to complete the job and get paid as there is for buyers to gain entry to their new homes.
The price that is paid on the day that the Agreement for Sale and Purchase is signed is usually the market price at that time. Check your Agreement for Sale and Purchase to know whether the purchase price is locked-in or whether there is a provision for the developer to increase the price. You should have your lawyer check for such detail during your Due Diligence period. If the market prices increase while construction of the home is underway, the capital gain is an added bonus made by the purchaser without even having paid in full for the home. The opposite could also be true, and that is the risk buyers take. Before signing up, consider which way prices are going and the effect that may have on your financial situation.
A new home Agreement for Sale and Purchase is more complex than the standard agreement used for transacting existing homes. The new home agreement will typically include details of the home you are buying, warrantees and what type of new title will be provided by the developer. If the purchaser’s lawyer hasn’t approved the agreement before signing, they should ensure a due diligence clause is included to allow enough time to obtain a legal opinion.
If finance is yet to be approved before the Agreement for Sale and Purchase is signed, the purchaser should always make sure to include a clause that allows them ample time to obtain this. Many purchasers opt to engage the services of a mortgage broker to help complete their bank application for finance, to ensure a smoother, stress-free transaction.
The Professionals’ sales team are all licensed under the Real Estate Agents Act (REAA) 2008 and as such, have a strict code of conduct to follow. All of our salespeople are answerable to the Real Estate Authority (REA), who have powers to penalise them if they breach the code. It is essential that buyers have a great trusting relationship with their salesperson, and if they ever feel this has been compromised, complaints can be made to the REA. Take extra care when purchasing a new build direct from a developer or through one of their employees if they are not a licensed Real Estate Agent, for all the reasons that Agents must be licensed, trained and have a governing authority.
If you're a first-time homebuyer, you have the option to withdraw your KiwiSaver contributions, including both your own and your employer's contributions, returns on investments, and government contributions (provided you maintain a minimum balance of $1,000). This withdrawal can significantly boost your deposit for purchasing land.
Please note that KiwiSaver funds cannot be used for a build contract, only for a land contract.
To be eligible for withdrawing a portion or the entirety of your KiwiSaver, you must meet the following criteria:
New guidelines now allow you to withdraw funds from your KiwiSaver for your initial deposit, even if you have a conditional sale and purchase agreement. You have the flexibility to make the withdrawal either at the deposit stage or when you settle.
If you're a previous homeowner, you'll still need to go through your scheme provider, but Kāinga Ora will first assess whether you qualify as a first home buyer. If you're determined to be in a similar financial position as a first home buyer, the letter generated by Kāinga Ora will need to be forwarded to your KiwiSaver scheme provider to support your application for withdrawing your KiwiSaver contributions.
Want to know more?
https://kaingaora.govt.nz/home-ownership/kiwisaver-first-home-withdrawal/
If you're a first-time homebuyer or a previous homeowner who has consistently contributed to KiwiSaver for 3 to 5 years, you could be eligible for a First Home Grant of up to $10,000.
You can apply for the grant through Kāinga Ora - Homes and Communities.
Find out more here - https://kaingaora.govt.nz/
Am I eligible? You must:
- Be over 18 years old.
- Have earned an income that falls below the specified income caps in the last 12 months.
- Not currently own any property, with an exception for Māori land ownership.
- Have contributed at least the minimum required amount to KiwiSaver (or a complying fund or exempt employer scheme) for a period of 3 years or more.
- Plan to purchase a property within the regional house price caps.
- Agree to reside in your new home for a minimum of 6 months.
- Ensure that the house or land you intend to purchase meets the property requirements.
Income Requirements:
In the 12 months before applying, your income must not exceed:
- $95,000 before tax for an individual buyer.
- $150,000 before tax for an individual buyer with one or more dependents.
- $150,000 before tax for two or more buyers, regardless of the number of dependents.
KiwiSaver Requirements:
You need to have consistently contributed at least the minimum amount to KiwiSaver for 3 years. The minimum contribution is currently 3% of your total income or at least $1,000 annually (whichever is lower). These 3 years do not need to be consecutive, but they must add up to 3 years' worth of contributions.
Deposit Requirements:
You must provide evidence that you have a deposit of at least 5% of the purchase price of the house you intend to buy or build. This deposit can come from various sources, including your KiwiSaver first-home withdrawal, your First Home Grant approval or pre-approval amount, savings in the bank, payments you've already made toward the property, or gifts from close family members. If using gifted money, you'll need to supply a completed declaration.
Regional House Caps:
House price caps have been adjusted to align with regional lower quartile house prices in many parts of the country. In Wellington, for instance, the new cap is $750,000 for both existing properties and new builds is $925,000 up from previous levels. Similar adjustments have been made in other major centers to reflect local housing market conditions. It's essential to check the specific caps for your area when considering a property purchase.
Property Requirements:
To be eligible for the First Home Grant, the purchase price of the property must fall within the regional house price caps. Additionally, you are required to commit to residing in your new home for a minimum of 6 months. This period can start from either:
- The date you purchase your home (the settlement date), or
- The date the code compliance certificate for the house is issued if it's a new build.
Furthermore, you must not currently own any land or property, including any property owned by a spouse or de facto partner that you could reasonably be expected to live in or sell. However, ownership of Māori land is an exception to this rule.
If you are purchasing a property with other individuals, all buyers must be acquiring an equal share of the property. If you opt for a private sale (not involving a real estate agent), you may need to provide evidence that you have paid a fair market price, such as a registered valuation.
How it Works:
You have two application options:
If you purchase a new home or land:
- If you buy a new home or land for building, you can receive $2,000 for each of the 3 (or more) years you've contributed to the KiwiSaver scheme. The maximum grant amount you can obtain is $10,000 if you have contributed for 5 or more years.
These grants are designed to assist first-time homebuyers in New Zealand in their journey to homeownership, making it more accessible and affordable. Be sure to review all eligibility criteria and consult with relevant authorities for the most up-to-date information.
To find out more including eligibility and property criteria, as well as income and deposit visit - https://kaingaora.govt.nz/home-ownership/first-home-grant/check-you-are-eligible-for-first-home-grant/
