A suite of measures intended to "deliver a more sustainable housing market" were announced by the Government on Tuesday, including an extension to the bright-line test.
House prices have risen dramatically over the last year, with the latest CoreLogic figures showing growth of 14.5 percent over the last year. The average value of a property in Auckland now sits well over the $1 million mark, making it extremely difficult for first home buyers to get on the ladder.
The Government has long promised it would make changes to slow rising prices and, on Tuesday, announced the following measures:
- A $3.8 billion fund to accelerate housing supply over the short to medium term
- Enabling more Kiwis to access First Home Grants and Loans by increasing income caps and the regional house price caps
- Extending the bright-line test from five to 10 years with exemptions to incentive new builds
- Removing the interest deductibility 'loophole'
- Extending the apprenticeship boost initiative
More detail about the Government's changes can be found here.
The live updates have now finished.
9:15pm - Westpac says the Government's announcement on Tuesday tilts the balance "dramatically" in favour of owner-occupiers.
The Government has removed the ability for property investors to offset the interest on residential investment properties as an expense against their income from those properties, effective from October 1.
Michael Gordon, Westpac's acting chief economist says removing interest deductibility tilts the balance in favour of owner-occupiers "who will now be the ones who determine the market price of houses".
"A rough calculation suggests that their average willingness to pay is about 10 percent below current prices, which suggests that house prices could fall by that much in the long term."
7:30pm - Property investors say it could be renters who end up the biggest losers following the Government's announcement on Tuesday.
Investors will no longer be able to offset interest paid on home loans against their rental income, which will significantly increase their tax bills.
"We were pretty shocked when we saw the announcement," says Andrew King of the NZ Property Investors Federation.
"All it does is make the supply of rental property go down and rental prices go up. I can't see that it's going to be in tenants' best interest."
The Government will invest $3.8 billion to increase housing supply and will work with local governments to connect infrastructure with land, making it build-ready. But heads are being scratched as to how it will actually look.
7:10pm - Finance Minister Grant Robertson admits his comments were "too definitive" when ruling out bright-line extension during the election campaign.
When asked if the bright-line test would change, Robertson replied, "no".
On Tuesday he said his comments were "too definitive" in that interview.
"Definitely feeling blindsided," said Sharon Cullwick of the New Zealand Property Investors Association.
"It's really like the Government has decided that we're villains in this case and really we are providing houses for people to live in."
6:30pm - The Government's new housing package goes against the advice of the Treasury, it has been revealed.
The Government's extension of the bright-line test - the tax on investment property - will be increased from five years to 10 years but this goes against what the Treasury advised the Government.
"The Treasury's preferred option is an extension of the bright-line period from five years to 20 years with no exemption for new builds," it said, according to its Regulatory Impact Statement.
"However it also considers a 15-year bright-line test is superior to the status quo, as it would help meet some of the Government's housing market objectives - but not to the same extent as a 20-year bright-line test.
5:45pm - The Green Party says the new homes enabled through additional borrowing capacity for Kāinga Ora should be increased.
The Government on Tuesday announced its Housing Acceleration Fund to ensure the Māori housing sector is able to thrive.
"New Zealanders have the right to live in decent homes. Specifically, our own whānau across Aotearoa need to have the right tautoko and more resource to be able to access homes," a Green party spokesperson said.
"Ideally, we would like the Kāinga Ora debt limit to be increased by $5 billion, rather than $2 billion, to better resource the building of homes. Our target would be 5000 new homes every year."
5:00pm - Property Council NZ says there's no silver lining to the bright-line test extension.
"New Zealanders need better access to quality housing and rental accommodation," Property Council NZ CEO Leonie Freeman says.
"While today's announcement will be of concern to many rental property owners, who will see costs rise, it should be of further concern for tenants, who will undoubtedly have these costs passed on in rent increases."
4:45pm - Disability Rights Commissioner Paula Tesoriero says she wants more detail on the Government's plan which was announced on Tuesday, specifically the accessible housing for disabled people.
Prime Minister Jacinda Ardern and Housing Minister Megan Woods confirmed they are committed to continuing the Government's public house building programme with 8000 homes for people "most vulnerable to housing shortages".
Particular focus for the housing would be given to Northland, Hamilton, Bay of Plenty, Gisborne, Napier, Hastings, Palmerston North and Whanganui.
Tesoriero said the lack of accessible housing for disabled people had been at crisis levels for many years.
"There is a shortage of accessible housing for disabled people in the 'to buy', 'to rent' and social housing markets," she said.
"Poverty is also an issue for many disabled people, but the lack of accessible homes means even those with sufficient income cannot buy their way out of the problem."
4:10pm - Some politicians and political parties have taken to social media to comment on the Government's housing announcement. Here's what they said:
3:45pm - Horticulture New Zealand says it's vital the Government doesn't build the new homes promised in Tuesday's housing announcement on "highly productive land used for vegetable or fruit growing".
"Every New Zealander deserves a house just like every New Zealander deserves fresh, healthy locally grown vegetables and fruit," said chief executive Mike Chapman.
"We can have both but current policy settings favour housing over food security, and keeping New Zealand’s most highly productive soils safe from urban creep."
He said over two years on from when the Government launched its draft National Policy Statement on Highly Productive Land, "nothing has been finalised".
"If New Zealand is not careful, a healthy diet will become just as unaffordable as houses for increasing numbers of New Zealanders."
3:05pm - Waikato University economics professor Frank Scrimgeour has slammed the Government's housing announcement, saying it doesn't address the fundamental issue which is driving house prices up: lack of supply.
"Today's Housing Acceleration Fund announcement, whilst well intentioned, has a real danger of ending up like the shovel ready projects and not happening - unless there's a strong connection with local government and Kāinga Ora," he said.
"It's a good idea but contrary to some of the reaction that it's not enough money, my worry is that, without the detail and a clear timeline, it won't be spent.
"It's also not clear whether this will be supported by the replacement to the Resource Management Act (RMA), or if it will be slowed down by the replacement to the RMA. Ultimately there still has to be a commitment to getting more houses, and more at the less expensive end of the market."
He said the Government's ability to properly address both the "urgent and long-term measures" is a huge challenge.
Prof Scrimgeour believes the extension of the bright-line test will also discourage property investors.
"At the end of the day you want a dynamic housing market and there's lots of reasons why people's circumstances change. We want assets to move rather than be stranded because there are tax incentives to hold on even though a house may be of greater benefit to a different owner," he said.
"The removal of interest rate deductibility requires greater clarity around new builds. Different rules applying to existing versus new houses creates perverse incentives, such as knocking over a house to build a new one, instead of repairing it because of the tax implications."
Prof Scrimgeour said he expects the Government's ideas will only help a modest amount of Kiwis.
2:30pm - The Real Estate Institute of New Zealand says while house price and income caps are welcome news for first-home buyers, in the short-term they may not be high enough.
"Currently, only 13 percent of properties sold across New Zealand [7 percent in Auckland] fall under the thresholds," acting CEO Wendy Alexander said.
"This is particularly true in places such as Porirua City, Lower Hutt City and Tauranga City where only 2 percent of properties sold recently were below the threshold."
1:29pm - Infrastructure New Zealand is welcoming the new Housing Acceleration Fund but warns it isn't a silver bullet.
"The fund will help address short to medium term infrastructure barriers to housing, but only if it is integrated with a visible, committed and sequenced pipeline of projects that encourages industry to invest, scale-up and lift construction sector productivity," says Infrustruce NZ policy director Hamish Glenn.
"While this investment is urgently needed and will be widely welcomed, there is a risk that new investment starts competing with existing commitments to the NZ Upgrade programme, shovel ready projects, rising three waters commitments and other critical initiatives.
"To avoid competing for the same fixed pool of labour and other resources, it is extremely important that visibility of the forward work programme is improved.
"Designers, architects, contractors, subbies and the raft of other critical service providers who take each project from idea to reality need to understand what's coming up not just in the next 6 months, but over 3-5 years and beyond if they are to invest in the systems, skills and capacity to meet a growing workload."
12:53pm - The New Zealand Property Investors Federation says the changes won't fix the housing market and will instead worsen the rental crisis.
Speaking to Newshub on Tuesday, federation chief executive Sharon Cullwick argued a large number of investors may now sell their rental properties.
"We think there will be a lot of landlords that will exit the market because of that, which means there will be fewer houses for people to rent."
"I'd say by two years there will be a higher rental crisis than what there is now, so there will be more people ending up going into emergency housing and they won't be able to build houses fast enough or those people."
More details here.
12:28 pm - Nelson Mayor Rachel Reese says the crackdown is a "game-changer" for the region and its housing crisis.
Reese said it will help Council work better with housing developers to build new homes.
"A lack of affordable housing is one of the most significant challenges facing the Nelson region. Our housing market is consistently one of the least affordable in the country and with central government committing to working with us on this issue and acknowledging the complexities of increasing housing supply, there is now potential for a lasting solution."
12:08pm - Real estate company Century 21 says updating the Home Start grant is long overdue.
Owner Derryn Mayne says the news will be well received by many desperate first-home buyers.
"Century 21, along with REINZ, has long been calling for the Home Start grant to be updated and made fit for purpose. As the market rocketed, we saw fewer and fewer properties and first-home buyers qualify, which was killing the Kiwi homeownership dream for many."
Mayne says she sees no issues with extending the bright-line test but warns that first-home buyers purchasing investment properties should be excluded.
"For years I've been telling homeowners that if they can't afford to buy where they want to live, then rent where they want to live and buy an investment property in another area."
"First-home buyers should be allowed to do that and not be taxed like property investors because for many that's the only way they can get into the market," she says.
11:20am - The Real Estate Institute of New Zealand (REINZ) says extending the bright-line test won't be a "magic bullet" in solving the country's housing problems.
"In actual fact, what it’s likely to lead to is residential property investors holding on to their properties for even longer in order to avoid paying tax, thereby further reducing the total pool of properties available in the market," Wendy Alexander, acting chief executive of REINZ.
"However, the fact that new builds are to be exempt from the bright-line test is welcome news and could go some way to helping to boost the overall supply of housing."
REINZ welcomed the increase to income and house price caps, but was surprised there wouldn't be any change to the Queenstown-Lakes, Waimakariri District, Selwyn District, Christchurch City and ‘the rest of New Zealand’ regional categories.
"We were surprised by the announcement around changes to interest deductions on residential property income as this will completely change the financial dynamics of investing in residential property. Currently you can use the interest deductions as a legitimate property cost, however, this will no longer be allowed from 1 October this year.
"In our view, people are likely to already be wary about investing in rental property given the changes to the RTA and the prior removal of ring fencing, however, this is likely to exacerbate concerns around investing in rental property and may see investors considering whether they can get better returns elsewhere.
"Many landlords are likely to increase their rent in the coming years as they look to offset the costs, thereby making rentals even more unaffordable than they are currently and making it even harder for renters to save a deposit for their own property. There is also a chance that a handful of unscrupulous landlords might look to even profit from the situation."
Alexander said the $3.8 billion infrastructure fund sounds like a sensible move, but the "devil will be in the detail around how the fund actually works and how developers can access additional funding".
"New Zealand has had an issue with a shortage of housing for a number of years now. What we need is to be able to build at scale and speed in an affordable manner, and in locations that are important to Kiwis e.g. close to transport hubs and amenities such as cafes and restaurants," concludes Alexander.
11:15am - The Greens are describing the Government's housing package as a "very small start" that doesn't go far enough to address the housing crisis.
Green Party Finance and Urban Development spokesperson Julie Anne Genter said the package shows the Government "is beginning to front up to the inequality driven by property speculation, but it needs to go further, faster to meet the scale of the housing crisis".
"We welcome the Government identifying and closing a tax loophole which allows investors to deduct mortgage interest costs from their taxable income. This will go some way to discouraging property speculation," she said.
"The increase in infrastructure investment to support new homes must focus on building environmentally sustainable and accessible homes and communities, rather than increasing car-dependent urban sprawl, so people can live in the places where their work, study, and family are.
"The Kāinga Ora debt limit should be increased by $5 billion to actually support Kāinga Ora to build at least 5000 new homes every year, integrated with frequent public transport and active transport connections.
"There are still more tools in the toolbox that the Government can use to stop the accelerating housing crisis. We urge the Government to remove the cap for the bright line test altogether.
"A 10-year cap extension just kicks the can down the road a few years, while property speculators will hold on to their properties until the day after the bright line test is over.
"We should not accept that it will take decades to turn around this housing crisis. The Government has the ability to address both demand and supply of homes in a way that will deliver fairer, greener communities.
"The housing crisis is getting worse by the day. We need bold, transformational action to ensure a soft landing, rather than a housing crash."
11:10am - The Opportunities Party expects the divide between renters and home owners to grow.
"While some of these changes may help some first home buyers in the short term, they are likely to bid up the prices on more affordable homes, meaning the benefits will be short lived. This is more middle class welfare from Labour," TOP says.
"The huge tax advantage to owning housing is simply shifted to owner occupiers and those who can buy with cash. Renters will simply have to hope that investors will choose to build new homes.
"What is more likely is rents will rise so landlords can make the same returns they were making before these tax changes. Or they will choose to sell, and the supply of rentals will reduce even further. However you slice this, renters will be the real losers in these policy changes.
"On a positive note, investment in infrastructure is absolutely needed - but $3.8B is a drop in a bucket and won’t go anywhere near far enough to solve our supply issues.
"Once again, we have another Government favouring the property owning class to the disadvantage of renters."
11am - Local Government New Zealand has welcomed the housing package.
"Today’s announcement will be welcomed by communities across New Zealand, who have been locked out of the home ownership by property speculators taking advantage of historically low interest rates," says LGNZ president Stuart Crosby.
"It’s also addresses a broader issue, of a generation of renters who are at risk of being pushed out of their accommodation and into social and emergency housing, by shifts in the market. There is no community in New Zealand who finds this acceptable.
"We also welcome the announcement of a $3.8 billion Housing Acceleration Fund. For councils, infrastructure is key to releasing land for development, but the rates based funding system has never been up to the task in the face of high population growth.
"This no-strings attached fund has the potential to break that deadlock in the short to medium term, while longer term measures to address housing affordability, such as the resource management reforms, are put in place and bedded in.
"LGNZ and our members are working proactively with the Government to advance other policy fixes and quick wins in the housing space, recognising that we can’t continue to operate in a siloed local government versus central government fashion as we have in the past."
10:40am - There's been a lot made of Robertson's pre-election comment to Newstalk ZB ruling out any change to the bright-line test.
That was put to Robertson at Tuesday morning's press conference.
"In the election campaign, we told New Zealanders that we would continue to work to address the housing crisis. Labour's policy was clear that we wouldn't introduce any new taxes. You are referring to a specific interview that I did. I was too definitive in my comments in that interview."
He endorsed comments by the Prime Minister that the Government has to act.
"We were silent on the bright-line test, but what is clear to us is that, since May, we have seen house prices go up by over 25 percent," Ardern said. "It is incumbent on us as a Government that when we see a problem as significant as this that we have to do something about it, and we have."
Ardern didn't class it as a broken promise.
10:30am - The ACT Party has now released a statement saying the new housing package blames "Mum and Dad investors without acknowledging why they've invested in housing - lack of supply has driven up house prices".
ACT Housing spokesperson Brooke van Velden said the extension of the bright-line test was a "capital gains tax by stealth" and vindicated ACT's opposition to the initial test under National.
She described the $3.8b fund as a "band-aid".
"The Government is partially right – investment is needed to get infrastructure like roads and services to vacant land so more houses can be built. But it isn’t required for just state house building, as today’s package is, it’s needed for all house building.
"ACT has been saying this for some time, and has proposed establishing 30 year infrastructure partnerships between central and local government to achieve this.
"Today’s $3.8 billion funding announcement is an expensive band-aid that if properly applied should result in some more houses being built. But it’s a fraction of what’s needed, which is why ACT’s longer term solution deserves to become Government policy.
"This goes to the importance of delivering reform to consenting that allows this sort of infrastructure to be more easily built.
"Proposed reforms to the Resource Management Act won’t achieve that – in fact they may make the process slower and more cumbersome. That’s why we’re placing the caveat on today’s funding announcement 'if properly applied.'
"This will only be a success if large numbers of houses are built in short order. We need to know much more about how this will happen and where these houses will be built."
10:25am - Collins believes the package will make things harder for first home buyers as she expects rents to increase again, making it more difficult for people to save for a deposit. The National leader also believes the bright-line test extension will see house prices rise.
She wants more detail around the $3.8 billion Housing Acceleration Fund, describing it as KiwiBuild 2.
Collins was pleased to see the first home buyers grant income caps increased.
"It's not enough if it is going to make a real difference."
10:20am - Judith Collins is now speaking to media. She says the Government has taken the bright-line test and "turned it into a full-scale capital gains tax". The National Party leader says Jacinda Ardern and Grant Robertson have broken their promises not to introduce a CGT or alter the bright-line test.
She bluntly accuses Robertson of "lying" when he said prior to the election that the bright-line test would not be extended. Robertson on Tuesday morning admitted his comments had been "too definitive".
"The Labour Party had lied to New Zealanders. They promised New Zealanders they were going to build 100,000 homes under KiwiBuild under 10 years. They built 700 under three years. They told New Zealanders that there would not be a capital gains tax under their watch and they also told New Zealanders there would be no increase in the bright-line test. They have lied on both accounts."
Jacinda Ardern said on Tuesday morning that she didn't believe extending the bright-line test was a broken promise and argued house prices had risen dramatically in recent months, requiring action. That was also stressed by Robertson, who said Kiwis expected the Government to address the skyrocketing prices.
10:15am - The NZ Property Investors' Federation has hit out at the interest deductibility change.
"The deductibility of mortgage interest for rental property providers is not 'a tax loophole' - any business in NZ is entitled to deduct interest paid from their taxable income. Once more, we have a unique and special penalty applied to, and only applied to, residential landlords and no-one else."
10:10am - Sharon Zollner, ANZ's chief economist, says the Government's move to close the interest deductibility 'loophole' was a "massive" move.
Instead of investing in property, people may instead put their money into other investments, she told Stuff.
"On a macroeconomic level, it’s very difficult to engineer a soft landing from a vertical take off… the risk is that they cause a more abrupt stop in the housing market than they were intending. And the housing market is the New Zealand economic story right now.
"In my view it’s well worth sacrificing a bit of economic activity at this point to head off house prices that are doing so much damage to our society, and also our economy in so far as a boom and bust cycle is extremely unhelpful and that had been looking more likely by the day.
"But the risk is that they overachieve and the economy is still pretty vulnerable. "
10:05am - Kiwis earning higher incomes will now qualify for the Government's First Home Grant and First Home Loan scheme - but only in specific areas.
An increase in the income and price caps was announced on Tuesday, part of the Government's efforts to make it easier for first-home buyers to get into the market, after a year of massive price inflation.
10am - Auckland Mayor Phil Goff is welcoming the new housing package, describing it as a "good step in the right direction".
"In particular, I welcome the government’s commitment of $3.8 billion to build infrastructure and accelerate home building," Goff said .
"The cost of infrastructure rather than availability of land is the major constraint Auckland faces in increasing home building. A fair share of this fund for Auckland will help ensure the infrastructure such as roading, water and public open space is in place to enable building to go ahead," the mayor said.
He said the additional $2 billion funding for Kainga Ora will allow the building of new social housing.
"Lifting price and income caps for first home buyers will provide some assistance on the margins, but these caps will need regular adjustment to catch up with the pace of house price movements in Auckland.
"I also welcome changes to tilt the playing field more towards first home buyers to counter the disadvantages they have faced when competing with property investors in the market.
"First home buyers can’t deduct their interest rates from their income and this change takes away the advantage that investors had in competing with home buyers.
"The bright line test recognises that income earned from property investment should be taxed in the same way as any other income.
"There measures are positive for the first home buyer but will take time before the benefits are realised."
9:50am - National's David Bennett is echoing comments from the NZ Property Investors Federation about the removal of the interest deductibility.
9:45am - The Taxpayers' Union has also accused Grant Robertson of breaking his pre-election promise not to touch the bright-line test.
"Investors will get around an extended bright line test by simply holding their properties for longer. That’s terrible for home buyers, because it means less liquidity the market. In fact, it can drive up prices as more buyers bid for fewer homes."
Spokesperson Louis Houlbrooke said property investment will become more costly through the extension and the removal of interest deductibility.
"Instead of renting out a second home to a family, property owners will stick one of their kids in it, meaning fewer properties available to renters, and higher rents as a result."
9:25am - Speaking to NZHerald, Andrew King, the NZ Property Investors Federation President, was shocked by the Government's decision to remove the interest deductibility 'loophole'.
"What, so every other business in New Zealand can still claim tax deductions, but not landlords?" King asked. "You're joking! This is just bizarre, it's crazy."
9:15am - Robertson has responded to the claim he has broken a pre-election promise by extending the bright-line test. He says he was "too definitive" when answering questions about the test prior to last year's election.
"New Zealanders expect us to address the housing crisis and we are doing that today."
Jacinda Ardern says she doesn't see it as a broken promise.
"Labour was silent on that question. At that time, we were just not seeing the rampant house price growth that we are now."
9:10am - National Party leader Judith Collins has reacted to the announcement by saying Grant Robertson has broken a promise not to make changes to the bright-line test. He committed to not altering the test prior to the election.
9:05am - Prior to the announcement, economist Cameron Bagrie said he wanted the Commerce Commission to look into the market.
"What the Government has been talking about is skewing the playing field away from the speculators and investors towards first-home buyers," economist Cameron Bagrie told The AM Show on Tuesday.
"You've got to be pretty careful in regard to that, because the investors, the so-called speculators, they supply housing which people rent.
9am - The Government is cracking down on property investors to help first-home buyers get a foot in the door by assisting with deposits and expanding the property investment tax, as well injecting billions to boost supply.
Read Zane Small's breakdown of the Government's announcement here.
