Being amongst the first countries to recover from the pandemic, New Zealand saw a leap in global property investment. Housing prices increased by 21.5% in the month of February, with 40% purchases belonging to investors.
“The last thing homeowners need right now is a dangerous housing bubble, but a number of indicators point towards that risk. 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.” said Jacinda Arden. These surging housing prices have kept first-time buyers and the low-income population out of the market which creates a risk for social inequality.
In an attempt to make speculation less profitable, the government will remove tax incentives for investors. The government will eliminate the ability of investors to use mortgage interest for reducing taxes. A $3.8bn plan has been announced to unlock more land for housing development. This will also make first home grants accessible to more.
“Removing deductibility for investors will dampen speculative demand and tilt the balance towards first home buyers,” said Grant Robertson.
The five-year period in which profits on the sale of investment property is taxed has been increased to 10 years. This will apply to all properties bought after 27 March and from 1 October investors will not be able to deduct mortgage interests. “The housing crisis is a problem decades in the making that will take time to turn around, but these measures will make a difference.” said the 40-year-old PM.
The government is also aiming to increase housing supply while reining demand. The supply has been constrained by high construction costs and planning rules. “There is no silver bullet, but combined all of these measures will start to make a difference,” said Arden.
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Source: Bloomberg
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