Global Finance taking you through the changes
A massive overhaul of the New Zealand housing market sector makes way for an astronomical shake up. The whole idea behind the changes are to reduce competition from investors who have cash on hand, keen to soak up sought after properties.
The government is dead set on cooling what has been called a runaway housing market. It dampens property investment speculation by reigning in the bolted horse so to speak.
The proposed changes would supposedly mean first-home buyers stood to gain from the reduced competition from investors. However other organisations have claimed that it doesn’t address first home buyer deposit capabilities.
With national median prices climbing by 23 percent from February this time last year to close to NZ$780,000 according to the real estate institute.
One of the more significant changes that has been made is the way in which investors could no longer claim home loan interest repayments as a business expense. Investors were able to use this to reduce their total taxable income.
The government announced they would be implementing changes to head the way for support for first homebuyers in helping increase housing supply.In response to significant house price rises, Honourable Grant Robertson mentioned that the government is set to double the length of time for the Brightline test that the national government had put in place. This would reduce the attractiveness of flipping residential homes to speculators increasing it from 5 years to 10 years.
Fear of missing out is still rampant for first home buyers as they see these increasingly significant changes in house pricing.
Even with the 3.8 billion housing acceleration fund, affordability is still an underlying issue.
What does this mean for First Home Buyers and Property investors
Summary of the changes that are to take effect are the following:
- Extension of the Brightline test from five to 10 years, meaning those who sell a house other than their family home within a decade will have to pay tax on the capital gain.
- Kāinga Ora housing agency to borrow a further $2b to buy land for housing.
- Removing a tax break that allowed investors to claim home loan interest repayments as a business expense.
- Pouring $3.8 billion into a scheme to accelerate infrastructure supply, such as vacant land, for new homes.
- Lifting the eligibility for First Home income caps from $85,000 to $95,000 for single buyers, and from $130,000 to $150,000 for two or more buyers.
- Increasing the price threshold for eligible houses by up to $100,000 in some areas of the country. For example, in Auckland for newly built homes the housing cap has increased from $650,000 to $700,000.
We can see here the question remains that even though all these changes may have significant impacts on the housing market. Buyers still need to front with a reasonable deposit to increase one’s likelihood of having a mortgage approved. Reducing that deposit amount shortfall ultimately improves the ability to get on the property ladder.
The fact remains that housing affordability is still at an all-time low. Despite all these changes to the housing market, it seems increasingly less about the deposit requirements needed but more so about the ability of a person or couples’ ability to service their loan.
The likes of the First home subsidy or grants and KiwiSaver or the bank of Mum and Dad have all contributed to one’s ability to pull together a reasonable deposit, it still comes back to that same contributing factor of affordability.
These new policy objectives seem without a doubt to skew the balance in favour of supporting first home buyers and level the playing field to be somewhat more balanced. It would seem that these changes appear more significant to property investors with the likes of the interest changes as oppose to buffering changes on first home buyers.
It is without a doubt easier for those with skin in the game looking for their first home whilst trying to dampen a property investors desire to purchase an investment property.
The question remains that these changes will certainly weigh in and impact property investors – but how much? We still feel that it will not be any easier for first- time home buyers to fulfil their dream to have their own home. For more information regarding the changes contact Global Finance 09 255 5500 and any further queries to marketing@www.globalfinance.co.nz
**These are general guidelines and are by no means a reflection of bank or lending policies