If you are writing on today’s housing announcement, please consider the following comments from the Real Estate Institute of New Zealand (REINZ). All comments are attributable to Wendy Alexander, Acting Chief Executive at REINZ:

“We understand what the government is trying to achieve by extending the bright-line test to 10 years, however, we don’t believe this will be a magic bullet in terms of solving New Zealand’s housing affordability issues and nor will it do anything to increase the supply of houses.

“In actual fact, what it’s likely to lead to is residential property investors holding on to their properties for even longer in order to avoid paying tax, thereby further reducing the total pool of properties available in the market.

“However, the fact that new builds are to be exempt from the bright-line test is welcome news and could go some way to helping to boost the overall supply of housing.

Changes to the First Home Loan and Grant

“REINZ welcomes the announcement that both the income and house prices caps will increase as of 1 April 2021 as this is something we have been calling for since November last year.

“Currently, only 13% of properties sold across New Zealand fall under the thresholds, so this should allow more people to access the scheme and to take advantage of the support the scheme provides. This is particularly true in places such as Porirua City, Lower Hutt City and Tauranga City where only 2% of properties sold recently were below the threshold.

“However, we were surprised, that some areas’ price caps will remain unchanged including Queenstown-Lakes, Waimakariri District, Selwyn District, Christchurch City and ‘the rest of New Zealand’. Currently, only 12% of properties sold in the Queenstown-Lakes District fall below the $650,000 threshold and only 11% fall below the $550,000 threshold in Selwyn District so this may need some urgent reviewing before the 1 April changeover in order to bring those Districts more in line with other parts of the country.

Interest deductions

“We were surprised by the announcement around changes to interest deductions on residential property income as this will completely change the financial dynamics of investing in residential property. Currently you can use the interest deductions as a legitimate property cost, however, this will no longer be allowed from 1 October this year.

“In our view, people are likely to already be wary about investing in rental property given the changes to the RTA and the prior removal of ring fencing, however, this is likely to exacerbate concerns around investing in rental property and may see investors considering whether they can get better returns elsewhere.

“Many landlords are likely to increase their rent in the coming years as they look to offset the costs, thereby making rentals even more unaffordable than they are currently and making it even harder for renters to save a deposit for their own property. There is also a chance that a handful of unscrupulous landlords might look to even profit from the situation.

Housing Acceleration Fund

“Broadly speaking the $3.8 billion infrastructure fund sounds like a sensible move as it should help to speed up housing developments by funding services such as roads and pipes which are well known to hold up development.

“However, the devil will be in the detail around how the fund actually works and how developers can access additional funding.

In closing

“New Zealand has had an issue with a shortage of housing for a number of years now. What we need is to be able to build at scale and speed in an affordable manner, and in locations that are important to Kiwis e.g. close to transport hubs and amenities such as cafes and restaurants,” concludes Alexander.

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