Prime Minister Jacinda Ardern, along with a number of other ministers, will this morning reveal the first part of the Government’s plan to cool New Zealand’s housing market.
She and Housing Minister Megan Woods, Finance Minister Grant Robertson and Revenue Minister David Parker, will make the highly-anticipated announcement at 9am. You can watch the announcement live here.
The plan will include initiatives to tackle the demand-side issue of the problem and could include an extension to the capital gains bright-line test.
It might also contain good news for those looking to get on the property ladder.
In the past, Ardern has mooted adjusting the thresholds around the home-start grants to make it easier for first-time buyers to get into the market.
The home-start grant enables first-time buyers access to $5000, or $10,000 as a couple, towards their first property.
There are a number of restrictions at the moment – including an earning limit of $85,000 per person, or $130,000 for a couple.
Today’s announcement will also include some new supply-side measures, which could include moves to free up more land for housing development.
Although she was not giving much away last night, Ardern did say that this morning’s announcement would “tip the balance away from property investors towards first home buyers and curb rampant speculation”.
She added: “The package will include steps to increase the supply of houses and improve affordability for home buyers and renters.”
It comes at a time when New Zealand’s housing market is running red-hot.
According to the Real Estate Institute of New Zealand, median house prices across the country increased by 14.3 per cent in the year to February 2020.
That number was 21.5 per cent over the same period in 2021.
Last night, Ardern said house prices were rising much faster than wages which meant homes continued to climb out of reach for many first home buyers.
The New Zealand housing market has become the least affordable in the OECD and property investors now make up the biggest share of buyers in the market, she told reporters.
But Ardern warned not to expect a “silver bullet” as there is no one way to fix the issues in the housing market.
“But there are things we can do,” she said, adding that the Government’s plan would “start to make a real difference to this complex problem”.
One area economists and tax experts agree the Government would move on is increasing the bright-line test.
The bright-line test is similar to a capital gains tax (CGT) on housing. It means people have to pay tax on any gains on property if it’s sold within five years.
There are, however, a number of exceptions – such as an exemption for a family home.
Former top Reserve Bank official, now independent economist, Michael Reddell, said an extension of the bright-line test is “almost a done deal”.
But he said extending the test beyond five years might not have the dampening effect the Government is looking for.
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