Details of the new housing package announced today
Tuesday, 23 March 2021
The government has announced a range of new measures to tackle the housing crisis, including an extension of the bright line test to 10 years and the removal of interest deductibility, as the clampdown on investors continues.
The housing package was announced by ministers this morning. Here are the main details for investor clients.
An extension of the bright line test to 10 years
The current bright line test will be doubled up to 10 years as part of the new reforms.
Grant Robertson said the move was needed to curb "rampant speculation", with investors making up the biggest share of buyers in the market.
“Extending National’s bright-line test and removing interest deduction loopholes for investors will dampen speculative demand and tilt the balance towards first home buyers," he said.
The new plan will keep the bright line test for new builds at the current five years.
Removal of interest deductibility "loophole"
The Government said the current tax system, which allows investors to offset interest payments against their tax bill, "favours debt-driven residential property investment over more fully taxed and more productive investments".
The "advantage" will be removed for investors.
Interest-only lending review
Ministers said they were considering a clampdown on interest-only loans.
The RBNZ will report back to ministers in May, and will also review debt to income rations.
$3.8 billion housing acceleration fund
The Government is launching a $3.8 billion Housing Acceleration Fund to speed up the pace of residential construction.
The fund will boost housing developments by funding infrastructure services like roads and pipes.
The Government will also help Kāinga Ora borrow an additional $2 billion to help with new land purchases.
Caps on First Home Loans lifted
Price caps on First Home Loan-eligible properties will be lifted to ensure that more homes qualify for the government scheme.
Income caps to get financial assistance will also be lifted to $95,000 for single buyers, and $150,000 for two or more people.
The changes come into effect on April 1.