Yvette McCullough
Wellington, March 23, 2021
The government plans to help first-home buyers into the market, by increasing the caps for financial support, and extending the bright-line test to 10 years.
It has unveiled its long-awaited plan to tilt the balance towards first-time Buyers and to turn down the heat in the market.
Prime Minister Jacinda Ardern said that the plan is a package of both urgent and long-term measures to relieve pressure.
“The housing crisis is a problem that has been in the making for decades. It will take time to turn around, but these measures will make a difference. There is no silver bullet but combined all of these measures will start to make a difference,” she said.
Income Gap lifted
From April 1, 2021, the income cap to access first-home grants and loans will be lifted from $85,000 to $95,000 for single buyers, and from $130,000 to $150,000 for two or more buyers.
Ms Ardern said that the government wants first-home buyers to be able to get into the market and hence the new measures are directed towards them.
“Rampant growth has been driven by speculators in the market. Regional price caps for accessing support have also lifted. The new caps are based off March 2021 data,” she said.
Package for firs-home buyers
Housing Minister Dr Megan Woods said that the government is also expanding the rules to enable more people needing only 5% deposit before first-home buyers can apply for support.
“This package of measures will help first-home buyers into the market and boost activity and create jobs in the construction sector, as we recover from the impacts of Covid-19. As we have investigated as to where the greatest housing needs are and what has been done to meet those needs, we have found out just how broken is the system,” she said.
Dr Woods said that modelling shows between 80,000 and 130,000 homes could be built over a 20-year period, but that is dependent on buy in with councils, iwi and private developers.
Curbing speculation
Deputy Prime Minister and Finance Minister Grant Robertson said that with property investors making up the biggest share of buyers it was essential that the government takes steps to curb rampant speculation.
As well as increasing the Brightline Test, which sees investment properties sold within a set time taxed on the capital gains, to 10 years, the government will remove the ability for property investors to offset their interest expenses against their rental income when calculating tax.
Mr Robertson said that these measures will dampen speculative demand and tilt the balance towards first-home buyers.
“The New Zealand housing market has become the least affordable in the OECD. Taking action is in everyone’s interests as continuing to allow unsustainable house price growth could lead to a negative hit to the whole economy,” he said.
Ranging Brightline Test
He said that to encourage investment in new builds, the Brightline Test for these properties will remain at five years.
“This will give Kiwis a better chance at purchasing their first-family home. I want to stress that the Brightline Test does not and will not apply to the family home,” he said.
However, in a pre-election interview, Mr Robertson had said that there would be no change in the Brightline Test under a Labour government.
Ms Ardern said at that time, New Zealand was not experiencing rampant house price growth as it is experiencing now.
She said that it is not a Capital Gains Tax and the government is simply extending a policy that was already there.
Associate Minister of Finance and Revenue Minister David Parker said that with interest rates as low as they are, it is a good time to transition, and will make things smoother for investors.
Ministers are also considering closing a loophole on interest-only loans to speculators.
RBNZ Report
The Reserve Bank will report back to Ministers in May on this and any proposals around debt to income ratios, particularly for investors. The plan also includes a $3.8 billion Fund to accelerate housing supply in the short to medium term.
Dr Woods said that the Fund would speed up the pace and scale of house building.
“We estimate the Housing Acceleration Fund will help green light tens of thousands of house builds in the short to medium term. Investment in infrastructure has been identified as one of the key actions the government can take to increase the supply of housing in the short term.
This Fund will jumpstart housing developments by Funding the necessary services, like roads and pipes to homes, which are currently holding up development,” she said.
The government will also assist Kainga Ora to borrow an extra $2 billion to scale up at pace land acquisition to boost housing supply.
It is also extending the Apprenticeship Boost initiative by four months, to further support trades and trades training.
Yvette McCullough is Senior Political Reporter at Radio New Zealand. The above story has been published under a Special Agreement with www.rnz.co.nz
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