- New Zealand to spend $3.8B on infrastructure to help cool property market
- Tax changes made, intending to prevent speculation of property
- NZ least affordable housing market in the OECD
Yesterday, New Zealand’s Prime Minister Jacinda Ardern took to a press pack with a $3.8 billion plan.
Whilst our real estate woes in Australia have seen vacancy rates reach all-time lows, Western Australia and Queensland seeing rates of less than 1% and Tasmania at one point had “less than one month’s stock left”, it seems to not compare to the magnitude of the Kiwi market.
Recently, Australian company Centuria bought a piece of the long white cloud, taking over the Visy Glass Plant in Auckland, and The Property Tribune reported on record median prices in the country. The country also lead the luxury listings index list from Knight Frank, prices rose so much it topped the 2021 PIRI list. The commercial market has also been hot property.
What’s going on?
It’s not an unfamiliar story in New Zealand, all-time low interest rates and government stimulus leading to a red-hot property market.
Similar to Australia, conditions have sent the housing stock in the country of five million into a frenzy, some commentators calling it a “runaway market”.
The Kiwi market has also been widely reported as “… the least affordable in the OECD”, Prime Minister Jacinda Arden said in a press conference yesterday that “The last thing our economy and homeowners needs is a dangerous housing bubble, but a number of indicators point towards that risk.”
As the economy recovers from COVID, the risk is not the only thing to consider, its also the type of buyer in the market to consider, with speculators and investors currently reported by many as having tax and other legislation skewed in their favour.
The proposed solution
A $3.8 billion package was announced at a press conference yesterday along with a slew of regulatory reforms.
New Zealand’s first home buyers grant income caps will be raised by ten thousand dollars for single buyers and twenty thousand for two or more buyers.
Caps on house values will be lifted by up to $100,000 depending on the area, the $3.8 billion package also includes a number of infrastructure projects.
Prime Minister Jacinda Ardern also announced a number of changes including doubling the bright-line test from five to ten years, meaning houses that are not the main residence now have to be owned for ten years or more, the sale of beforehand will attract a tax on the profit, to be considered as income; the move is intended to stifle speculators in the market.
The government is also closing a number of other interest deductibility loopholes, effectively meaning the end of negative gearing for many New Zealand properties.
