There's mounting pressure on the Government to update First Home grant criteria as a growing number of prospective buyers find the scheme "pointless" for their region.
"Ten thousand dollars on anybody's deposit is a massive boost," prospective first home buyer Shaun King told 1 NEWS.
King and his partner Caitlin Richards looked for a house in Porirua under the grant's regional limit of $500,000 for an existing home, but found prices were too high to be eligible.
They extended their search an hour north to Levin, but there too, prices exceeded that region's price cap of $400,000 for an existing home.
"To find out we couldn't even use it… you want to give up but it's like you can't, because you still want to get in that market but it's just impossible," Richards said.
King added: "Gut-wrenching, really."
King said whether a prospective first home buyer can qualify for the grant money should be reviewed on a case-by-case basis, based on the region the house they are looking to purchase is in and the buyer's personal factors such as income.
The First Home grant scheme was introduced in 2015 by the National Government to help Kiwis achieve home ownership.
Eligibility has been changed several times since then.
First home buyers are eligible for a $5000 grant for an existing home or a $10,000 grant for a new home if they meet income criteria and if the house they are purchasing is priced between $400,000 and $650,000, depending on the region where the house is and if the house is new.
Real Estate Institute New Zealand figures show just 18 per cent of houses sold last month met that criteria.
Eleven areas had less than 10 per cent of houses sales priced within the price caps.
In Porirua there were none.
The grant is more accessible in some parts of the South Island.
In Invercargill, more than 50 per cent of January house sales were under the region's price cap of $400,000.
Invercargill homeowner Janet Fredric said she was very grateful to receive a $5000 grant last year.
"I think it's amazing, it helped us get into our first home, it boosted our deposit by a little bit," she said.
Further north, though, the real estate industry and economists are calling for the grant's price caps to be lifted.
"If they keep it at a reasonable level then I think it's actually going to just help the people that really need it and make the grant accessible for people," mortgage broker Mike McGinley said.
McGinley said the income eligibility of $130,000 or less before tax for two or more buyers should remain the same so the grant remains targeted for those that would otherwise find it tough to enter the property market.
He said another initiative to help first home buyers enter the market could be if the Government removed the income tax for investors selling a property after less than five years of ownership if it's proven they're selling the house to a first home buyer.
Economist Cameron Bagrie said grant eligibility is disconnected with the market and is cutting first home buyers out.
"I wouldn't be saying they should be lifted if we hadn't seen house prices rise gargantuanly," he said about the price caps.
Bagrie said while all financial policy decisions have consequences and none are "perfect", lifting the caps wouldn't have a significant impact on setting market prices as it would be "catching up" to where the market's prices already are.
Economists Shamubeel Eaqub and Liz Kendall agree the price limits should be increased for the policy to achieve its purpose, but both told 1 NEWS unless the Government introduces housing and land supply initiatives alongside the increase, the grant changes will only add to existing supply issues and won't make the housing market more affordable.
Eaqub called the initiative "hugely problematic".
Housing Minister Megan Woods said she was advised mid-2020 that increasing the scheme's price caps wouldn't have a significant impact on home ownership rates but has asked for further advice on the grant as house prices continue to rise.
"It's part of that broader package that both myself and the Minister of Finance and the Prime Minister have been alluding to, so we'll have more to say at that point," she said.