The Urban Developer
AdvertiseEventsWebinars
Urbanity
Awards
Sign In
Membership
Latest
Menu
Location
Sector
Category
Content
Type
Newsletters
Untitled design (8)
FULL PROGRAM RELEASED FOR URBANITY-25 CONNECTING PROPERTY LEADERS ACROSS THE ASIA PACIFIC
FULL PROGRAM RELEASED FOR URBANITY-25 WHERE THE PROPERTY INDUSTRY CONNECTS
VIEW FULL AGENDADETAILS
TheUrbanDeveloper
Follow
About
About Us
Membership
Awards
Events
Webinars
Listings
Resources
Terms & Conditions
Commenting Policy
Privacy Policy
Republishing Guidelines
Editorial Charter
Complaints Handling Policy
Contact
General Enquiries
Advertise
Contribution Enquiry
Project Submission
Membership Enquiry
Newsletter
Stay up to date and with the latest news, projects, deals and features.
Subscribe
ResidentialRenee McKeownWed 29 Sep 21

New Zealand Steps in to Prevent Housing Bubble

TUD+ MEMBER CONTENT
5029fe55-3c30-4e25-a4b6-f774838cd475
SHARE
8
print
Print

New Zealand is scrapping tax incentives for investors in an effort to cool one of the hottest property markets on the planet as it responds to the country’s “housing problem”.

Property values have increased nearly eight times faster than income with prices up 27 per cent on average according to Corelogic.

The draft legislation would limit the availability of deduction for interest expenses for existing residential properties, however would not extend to new builds.

Finance minister Grant Robertson said they needed to stem investor demand.

“We want to curb investors’ appetite for existing residential properties but also want to stimulate investment in new housing,” Robertson said.

“That’s why we’re also proposing an exemption for property development and for new builds, allowing interest deductions in full.”

Interest deductions on borrowings drawn down for homes acquired on or after March 27, 2021 would be phased out between 1 October 2021 and March 2025.

Mortgage lending restrictions were also introduced in March by the Reserve Bank of New Zealand, targeting investors who would only be able to borrow 60 per cent of a property’s value.

Investor appetite is already starting to cool

Robertson said since the limitations proposals were announced in March early indications suggested that enthusiasm for existing residential investment properties might be waning.

“The detailed proposals we are releasing today will further level the playing field for existing homes in favour of first home buyers,” Robertson said.

“Tax is neither the cause nor the solution to the housing problem, but it does have an influence, and this is part of the government’s overall response.”

Exemptions extended to new purpose-built rentals and hotels as well as owner-occupiers with flatmates who would not be affected by the changes.

Change in New Zealand property values

LocationMonthQuarterAnnualAverage Value
New Zealand1.6%5.2%27.0%$937,148
Auckland2.1%5.7%24.7%$1,337,648
Hamilton-2.8%-0.5%21.8%$782,774
Tauranga2.6%5.4%28.0%$1,021,021
Wellington2.4%6.3%35.0%$1,065,224
Christchurch1.5%6.7%26.0%$654,198
Dunedin1.1%4.0%23.2%$672,058

^Source: Corelogic NZ HPI for August 2021

Lockdowns in New Zealand were further adding to the transition towards a more sustainable growth rate.

Corelogic NZ head of research Nick Goodall said any reacceleration of house price growth rates, if it eventuates, was likely to be short lived.

“Apart from the prospect of rising mortgage rates and the impact of tighter credit policies, it’s important to factor in the weight of worsening housing affordability,” Goodall said.

“However, as property values rise faster than incomes, the cost of purchasing a home will simply become out of reach for a growing number of would-be buyers, especially as increasing interest rates start to impact the amount of money people can borrow.”

New Zealand ranked second, globally for house price growth behind Turkey this year.

Low property stock was also fuelling this growth with residents preferring townhouses over apartments, with units making up 10 per cent of approvals compared to Australia at 34 per cent.

Despite this, development of 7000 residential apartments and 167,000sq m of commercial office space is under way in Auckland.

ResidentialAustraliaReal EstateSector
AUTHOR
Renee McKeown
More articles by this author
ADVERTISEMENT
TOP STORIES
Exclusive

Private Credit Surge, Skittish Buyers Force Banks to Loosen Presale Rules

Taryn Paris
5 Min
Forme's James Place on James Street, Fortitude Valley Brisbane
Exclusive

Forme Pushes the Boundaries on James Street Precinct

Renee McKeown
4 Min
Exclusive

Invicta House Rebirth Proves Recipe for Heritage Success

Leon Della Bosca
7 Min
Exclusive

Freecity’s $300m PBSA to Prove Worth of Modular at Scale

Leon Della Bosca
7 Min
Exclusive

Billbergia’s John Kinsella: Whiskey, Fun and a Fear of Heights

Vanessa Croll
8 Min
View All >
HWL Ebsworth's adaptive reuse plan for 5 martin Place Sydney
Office

Martin Place ‘Money Box’ Revamp Plans Filed

Leon Della Bosca
Exclusive

Private Credit Surge, Skittish Buyers Force Banks to Loosen Presale Rules

Taryn Paris
South Molle Island before Cyclone Debbie
Hotel

South Molle Island on Block as Chinese Owners Exit

Leon Della Bosca
Chinese owners reportedly seek $30m after $25m purchase as Whitsundays tourism market attracts billionaire investment…
LATEST
HWL Ebsworth's adaptive reuse plan for 5 martin Place Sydney
Office

Martin Place ‘Money Box’ Revamp Plans Filed

Leon Della Bosca
4 Min
Exclusive

Private Credit Surge, Skittish Buyers Force Banks to Loosen Presale Rules

Taryn Paris
5 Min
South Molle Island before Cyclone Debbie
Hotel

South Molle Island on Block as Chinese Owners Exit

Leon Della Bosca
4 Min
Hindmarsh Tiers Retreat HERO
Hotel

Eco-Luxury Retreat Revealed for SA’s Fleurieu Peninsula

Leon Della Bosca
3 Min
View All >
ADVERTISEMENT
Article originally posted at: https://theurbandeveloper.com/articles/nz-government-steps-in-to-cool-property-market