There are number of measures being implemented by New Zealand’s government to prevent the formation of a properties bubble and to increase number of first home buyers. The government intends to remove tax incentives for investors to make speculation less attractive.
“Property investors are now the biggest share of buyers, with the highest amount of purchases on record. Last year, 15,000 people bought homes who already owned five or more.” prime Minister Jacinda Ardern said Tuesday in Wellington
New Zealand saw spectacular house price rises of about 114% (82.5% inflation-adjusted) from 2001 to 2007. New Zealand’s success in managing the Covid-19 challenge lead to economy recover before many others. The result of this success is being seen in house prices increased by 21% last year. Auckland has average house prices of NZ$ 1,040,000 (US$ 739,603) – the country’s most expensive – followed by Wellington, with an average price of NZ$ 812,251 (US$ 577,638), and Tasman, with an average price of NZ$ 735,000 (US$ 522,700) making Auckland the fourth least affordable city in the world.
In order to stop speculation the government will phase out the ability of investors to claim mortgage interest as a tax-deductible expense. It will extend of the period in which profits on the sale of investment property are taxed to 10 years from five. Investors won’t be able to deduct mortgage interest as an expense on properties acquired from March 27 as of 1 of October 2021. For existing property owners, mortgage interest deductibility will be phased out over the coming four years so that it can’t be claimed at all by the 2025-26 tax year. New builds are expected to be exempted from this change. The government is trying to decrease housing demand while also increasing supply, which has been constrained by a raft of factors including planning rules and high construction costs. Government intend to establish a NZ$3.8 billion fund to unlock more land for housing development, and also make first home grants available to more people.
All these measures might slow down the increase of the housing prices and increase the number of the first home buyers.
Interesting to watch the next 18 months!!
Image source: http://unsplash.com