Building firms hurt by home-loin limits

Press, 18 August 1980, Page 6

Building firms hurt by home-loin limits

Early ,indications are that new income limits;on-Hous-ing Corporation home loans have significantly, reduced business for some Christchurch building firms. < f The Minister: ’of Housing (Mr Quigley) introduced a new housing package on July ?1, designed to entice new-home - finance seekers from, the'Housing Corporation, td. the private sector. Although.' ?-iyif Quigley raised? the, amountthe corporations was prepared to lend /oh new? first homes, from $20,000 to $24,000, he imposed an income limit of $230 ,a week gross for a family’s ..main earner, plus $lO a week for each child. He also/made a $4OOO intersuspensory loan available .for/ those.. seeking finance from the private, sector ;-- ' So > far /in Christchurch there has beeri no evidence that more loan's are being approved since the suspensory loan came in, and many firms that have relied on their /customers’ qualifying for Housing > Corporation loans are .finding that the income/limits are causing business do suffer.

According to Mr A. Merritt, of Merritt Beazley Homes, Ltd, his? firm’s business for houses that are-nor-mally -financed by ■ Housing Corporation loans .has fallen about 25 per- cent since July

The drop in business for houses in the price bracket usually financed; by Housing Corporation loans has been more, like 50 per cent for

Enterprise Homes, Ltd, according to a company spokesman. However, overall business has: not been affected much 'because only a small portion of the firm’s houses are within this price bracket. ..//’Sy'A//--

i Mr R. Mauger,of R. G. Mauger, Ltd,/said "that busi- ; ness had already been/ desperate before the new housing package and' the hew regulations had 'not; ■■ made the situation much worse. “If it were not for the , ownership flats that we i build, we would be out of business,” he said.,:/“We count ourselves lucky- if we can find buyers /to finance more than five or six houses a year. .Many people are forced to buy flats because that is all they, can afford.” ■ According .to the. Housing Corporation's assistantmanager of; / loans in Christchurch (Mr K. G. Muirhead), the number of . loan applications that: has passed corpbration screening processes since July 1 has dropped about 5 per cent over. all. The ~: applications .. . included those :; for new houses,- existing houses, and renovations/ He'indicated that applications for hew first houses had dropped further than 5 per cent, however, as there had been an increase in applications for existing houses and renovations getting through Screening. Criticism of the new package by builders has been widespread throughout New ... . ./

Many say that the $230 income limit plus $lO for

each child, has severely limited , the" number 'of eligible people, especially, since the recent 4 . per' cent pay rise. A stratum of New Zealanders with incomes just above the/limits does’ not stand a chance- of /getting loans from the private sector, because members’ ’ assets and abilities to repay loans are not upeto private ? sector standards. . •••■■/f.-'.tSU

/"Also, in many cases,- the rising: cost of new houses along with the: extra $4OOO of corporation finance, has made 'loan repayments exceed the allowed 30 per cent of the income of one-income families. This is especially, so where only minimum deposits have been found. Most of the people who qualify for corporation finance do not have enough for a'i: large, deposit and must take out a second mortgage to make .up the difference of the cost of a hew house. But because of the size of these families’ incomes, once children are born they often find it impossible •to keep up payments, the builders say. ' “I can see a time, not too far ahead, when the. ordinary New Zealander will not be able -/to -afford his own home,” Mr’ Mauger said. What steps should' the Government take to prevent this from happening? “It should bring down the interest rates and raise the amount of loans,” Mr Mauger said. “It could also join efforts with builders, who have land available, to subsidise the cost of sections by long-term loans.” - ■ ■