Minister of Housing Phil Twyford announces 68 new KiwiBuild homes in the Marfell area.

New Plymouth KiwiBuild buyers have a choice: Pay $326,000 for a median-priced Marfell home, or up to $450,000 for a KiwiBuild property.

Housing and Urban Development Minister Phil Twyford announced the plans for the development of 68 "modest starter homes" in New Plymouth on Tuesday.

He said many of the homes would be for sale under $400,000 and all would have a maximum price of $450,000. It would "rejuvenate an area that has been let with vacant lots and rundown houses," he said.

But that's pricey for Marfell: CoreLogic says the suburb's median price is $326,000 while Homes.co.nz, which gathers data from council records, puts it at $271,000.

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A KiwiBuild spokesman said the land was government-owned and had been sitting empty for a number of years.

"The median house price in Marfell is $326,000 but this statistic includes smaller houses and older houses, many of which are in poor condition. The KiwiBuild homes will be brand newthree- and four-bedroom family homes, built to the Homestar 6 rating.

"These KiwiBuild homes will be built as cost-effectively as possible to make them affordable. They are significantly cheaper than other nearby new-builds."

Homes.co.nz chief data scientist Tom Lintern said the KiwiBuild prices were on par with New Plymouth as a whole, but Marfell was a lower-value suburb.

ANDY JACKSON/STUFF Local residents Krete O'Brien, Tailor-Joe O'Brien, Luke Ah Kuoi love living in the area but say the house behind them where they live is cold and damp.

"Approximately half of New Plymouth's suburbs have median values of less than $400,000, suggesting that there are many properties within the existing housing stock that are priced similarly to Marfell's KiwiBuild development."

CoreLogic data showed most three-bedroom houses in Marfell were built in the 1950s to 1970s and the median value of those properties was $308,500, which head of research Nick Goodall said reflected a lower quality of housing. The median value of newly built three-bedroom houses across New Plymouth was $641,000.

National MP Judith Collins said first-home buyers would be better to look for an existing home they could improve to add value.

"By setting the price at which he's willing to sticker a house to be known as KiwiBuild, Phil Twyford is pushing up prices."

Infometrics economist Gareth Kiernan said Marfell seemed an unusual place to build. "It almost seems like they've chosen it because it's somewhere they can stick houses and meet their price target without giving it any thought."

Building houses that were more expensive than the median for the area would not achieve anything unless there was an undersupply, he said. "It's not an area I've heard that about. The numbers make me question why the government feels it needs to intervene in the New Plymouth housing market."

Twyford said the mortgage repayments would be the same as the average rent for a three-bedroom home.

A 90 per cent mortgage on $450,000 would cost $546 a week with an interest rate of 5 per cent. In Taranaki, employed people are this year earning a median $979 a week.

Meanwhile, an exemption was made to allow smaller section sizes at the Te Kauwhata KiwiBuild development.

The 200 sq m minimum lot size is about half the normal size allowed in that area.

KiwiBuild said developers had to comply with local district plans and seek Resource Management Act approval.

A spokesperson for Waikato District Council said the developers had applied for a private plan change to rezone an area of 194ha.

"A hearing was held on March 12 and 13, 2018, and the private plan change became operative in July."