New Zealand will increase housing supply and remove incentives for speculators as it attempts to rein in the nation's runaway house prices and prevent a housing bubble.
The New Zealand government on Tuesday announced a series of billion-dollar measures to tackle what Prime Minister Jacinda Arden described as a housing crisis.
The new housing package includes a $3.8-billion (NZ$3.5-billion) housing acceleration fund aimed at speeding up the pace and scale of housing infrastructure and construction in the short to medium term.
“The housing crisis is a problem decades in the making that will take time to turn around,” Ardern said.
“There is no silver bullet, but, combined, all of these measures will start to make a difference.”
The package also includes extra support for first home buyers with the income cap on the government’s First Home Grants and loans lifted from $85,000 to $95,000 for single buyers, and from $130,000 to $150,000 for two or more buyers.
There will also be fewer tax breaks for property owners when they sell homes or earn rental income, with the government removing the ability for future property investors to offset interest expenses against rental income.
The interest deductibility loophole will be phased out on existing residential investments.
The New Zealand housing market has become the least affordable nation in the OECD.
Latest data from the Real Estate Institute of New Zealand shows that the nation's median house price increased 22.8 per cent to $780,000 last month, up from $635,000 in February 2020. REINZ says this is a record high for the nation.
Property investors now make up the biggest share of buyers in New Zealand's house market.
Earlier this year, New Zealand's Reserve Bank announced it would tighten loan-to-value restrictions on mortgage lending, with the tightest restrictions to be imposed on property investors in a bid to slow surging house prices.
Finance Minister Grant Robertson said that continuing to allow unsustainable house price growth could lead to a negative hit to the whole economy.
“House price increases of the magnitude we have seen in recent months are not only harmful to affordability, they also present a risk to economic stability,” Robertson said.
The pace of property sales continued last month, REINZ chief executive Bindi Norwell said, with figures showing a 14.6 per cent uplift on sales volumes compared to the same time last year.
“February was certainly an extraordinary month with a new record median price for the country... [Wellington], Manukau and Waitakere Cities now all have median prices of $1,000,000 or more, meaning that seven districts across the country now have reached or exceeded the million-dollar threshold,” Norwell said.