Initiative receives mixed industry response
The government has announced a housing package that aims to deliver a more sustainable housing market and support first-home buyers (FHBs) into homeownership by increasing housing supply and removing incentives for speculators.
According to Housing Minister Megan Woods, the new housing package features:
- A $3.8 billion housing acceleration fund;
- Access to first home grants and loans with increased income caps and higher house price caps in targeted areas (income caps to get financial assistance will be lifted from $85,000 to $95,000 for single buyers, and $130,000 to $150,000 for two or more buyers);
- Bright-line test doubled to 10 years, with an exemption to incentivise new builds;
- Removal of interest deductibility loophole for future investors and phased out on existing residential investments;
- Government support for Kāinga Ora to borrow $2 billion extra to scale up at pace land acquisition to boost housing supply; and
- Extension of Apprenticeship Boost initiative to further support trades and trades training.
New Zealand Prime Minister Jacinda Ardern commented: “This is a package of both urgent and long-term measures that will increase housing supply, relieve pressure on the market, and make it easier for first-home buyers.”
“The housing crisis is a problem decades in the making that will take time to turn around, but these measures will make a difference. There is no silver bullet, but, combined, all of these measures will start to make a difference.”
The government’s announcement has received mixed responses from the industry, with Local Government NZ (LGNZ) and local councils expressing their support.
“Today’s announcement will be welcomed by communities across New Zealand who have been locked out of homeownership by property speculators taking advantage of historically low-interest rates,” LGNZ president Stuart Crosby said.
“We also welcome the announcement of a $3.8 billion housing acceleration fund. For councils, infrastructure is key to releasing land for development, but the rates based funding system has never been up to the task in the face of high population growth.”
Meanwhile, the NZ Property Investors’ Federation (NZPIF) issued a warning on the removal of interest deductibility.
“While the Bright Line test increase will do nothing to stop property speculation, removing interest deductibility will increase the cost of providing rental properties drastically,” said NZPIF executive officer Sharon Cullwick.
Without the ability to claim the legitimate expense of mortgage interest costs, the NZPIF estimates that the cost of providing a $600,000 rental property will increase by around $6,000 annually.
Century 21 New Zealand owner Derryn Mayne stated that extending the bright-line test to 10 years is not an issue. However, it should exclude FHBs purchasing investment properties.
“For years, I’ve been telling homeowners that if they can’t afford to buy where they want to live, then rent where they want to live and buy an investment property in another area. First-home buyers should be allowed to do that and not be taxed like property investors because, for many, that’s the only way they can get into the market,” Mayne said.
Commenting on the Home Start Grant, she said: “Century 21, along with REINZ, has long been calling for the Home Start Grant to be updated and made fit for purpose. As the market rocketed, we saw fewer and fewer properties and first-home buyers qualify, which was killing the Kiwi homeownership dream for many.”
