New Zealand To Rein In Housing Market With Billion Dollar Plan
The New Zealand government has announced a series of billion-dollar measures aimed at tackling the country’s housing crisis as Prime Minister Jacinda Ardern warns there is “no silver bullet”.
House prices have been driven up 23% in just 12 months, far ahead of wage growth, pushing younger and lower-income buyers out of the market. On 23rd March morning Ardern announced a package intended to address problems of housing supply and demand, and help shift the balance away from investors.
“New Zealand’s housing crisis is longstanding and will take time to turn around. There is no silver bullet … [but] the need for further action is clear,” said Ardern. “The last thing our economy and homeowners needs is a dangerous housing bubble, but a number of indicators point towards that risk.”
First-homebuyers will be able to access more government help from 1 April, with the income cap on the government’s First Home Grants and loans lifted from $85,000 to $95,000 for single buyers, and from $130,000 to $150,000 for two or more buyers. Regional price caps have also been increased to reflect increased prices.
Measures have also been introduced to dampen speculation, after property investment reached record-highs due to low interest rates and New Zealand’s speedy economic recovery from the pandemic last year. In 2020 15,000 people who already owned five or more properties, bought houses.
The finance minister, Grant Robertson, announced an extension to the “bright-line test” – the holding time of investment properties to get tax offsets – from five to 10 years to curb the flipping of residential homes by speculators. New-build homes would be exempt to encourage more construction.
The government has also removed the ability for property investors to offset their interest expenses against their rental income when calculating tax. More loopholes that favoured investors would be closed, with the Reserve Bank due to report back on possible measures in May.