Praneeta Mahajan
Hamilton, November 8, 2023
With a change in government, property rules will invariably shift as the National Party looks to deliver on the promises they made to voters during the campaign once they take the reins.
CoreLogic has noticed that “currently, things are very stimulatory to the housing market, like strong immigration, very strong employment and the perception that the new government, particularly in an Act coalition, would push prices back up.”
Data from NZME-owned OneRoof shows the number of listings on the market starting to increase, indicating activity is starting to pick up after a subdued period.
National has also proposed inviting foreign buyers back to the market on the condition that they pay a 15 % tax on any properties they purchase over a value of $2 million.
The changes proposed by both the National Party as well as ACT party would come at a time when the country’s property market has struggled, with house prices dropping over the past two years.
Going for growth
In the first 100 days in power, the National-led Government has promised to introduce the Going for Housing Growth policy. This policy aims to unlock land for new housing, build infrastructure to support the new development and share the benefits of growth through Housing performance incentives for councils.
The new housing growth policy is planning to ask councils to bring more land forward to build houses on. This might be land which was earmarked for development in the future on undeveloped or greenfield sites at the edge of the city. This will bring down the price of land and increase the supply of affordable housing, as per the proposal.
A National-led government has also pledged to simplify planning rules and make resource consents for new houses cheaper and faster. In the coming years, the new government plans to completely replace the Resource Management Act, which governs how land is used and what infrastructure is provided, among other things.
The new government has promised to reform infrastructure legislation so that it is easier for developers to fund infrastructure and it plans to establish a National Infrastructure Agency in the first 100 days of government.
It has also pledged to change how infrastructure for new greenfield developments (undeveloped land in urban or rural areas) is funded with more choices for councils.
The new government has promised to financially reward councils for being proactive about building more houses through its $1 billion Build-for-Growth fund. For every house delivered above the five-year average in a council area, the council will receive $25,000.
The National-led government has proposed to close some initiatives first-home buyers have used in recent years. These include the Buying Off The Plans initiative (formerly known as KiwiBuild) and the Affordable Housing Fund.
Growing our rental market
The National-led Government has promised a strong plan to boost Aotearoa New Zealand’s rental market.
After Labour introduced some of the biggest changes in the tenancy area for about 35 years, both National and Act campaigned on returning at least some power to landlords once they stepped into government.
The National Party has promised to end the automatic roll-over of fixed-term tenancies to periodic tenancies. The new Government believes these steps will put downward pressure on rents.
Boost for Investors
The National Party is proposing the reversal of two current housing policies which will change conditions for property investors and, it believes, boost Aotearoa New Zealand’s rental market. And if investors react positively, there will be more competition for first-home buyers.
At the moment, mortgage interest deductions on residential rental properties are either denied or are being phased out. This has made landlords’ annual tax bills that much higher, depending on when they bought their investment property. From 1 October 2021, interest from any new loans drawn down on or after 27 March 2021, were no longer tax deductible, though there has been an exemption for new builds.
National’s policy is to restore interest deductions on residential rental properties in phases. So according to the party’s earlier announcements, 50% of interest deductibility will be kept from April 2024 rather than being reduced to 25%, in line with the current interest limitation rules. Then, in April 2025, 75% of interest deductibility will be restored and, from April 2026, it will be 100%.
Bright Line Test
Meanwhile, the time frame of the bright-line test is planned to change under the National-led Government from 10 years to two years. The bright-line test rules that, if you sell a residential property that is not your main home within a certain time frame, you will have to pay income tax on any gains you make. In 2021, the Labour Government extended the timeframe from five years to 10 years on property bought on or after 27 March 2021. By July 2024, under the National-led Government, the bright-line test is aimed to return to two years, the same level as in 2015, when it was first introduced.
The bright-line test was first introduced to disincentivise short-term property investors from buying homes, doing them up and flipping them. In 2021, the market had seen a lot of new investor activity, so the Labour-led Government extended the bright-line test time frame from five to 10 years.
The reduced time frame of the bright-line test may lead to investors selling properties they no longer want or can afford. Meanwhile, the phased return of mortgage tax deductibility may lead to property investors adding to their portfolios once more, although their biggest constraint in the current market remains relatively high-interest rates and low yields.
In another policy change likely to please property investors, the National Party has also said it will reintroduce no-cause terminations to property leases. Landlords will simply have to give tenants 90 days’ notice before terminating their lease.
Praneeta Mahajan is an Indian Newslink reporter based in Hamilton.
