After almost a decade under National, New Zealand’s government has changed. Naturally, changes to policy will follow. Whether these changes will be positive, negative, or neutral depends on you and your situation.
Housing affordability – particularly in Auckland – was a hot-button issue during the election. The incoming Labour government is set to introduce policies designed to make housing more accessible, including a ban on foreign investors, an extension of the capital gains tax, and a plan to build 100,000 affordable homes. They are also likely to reduce immigration numbers, which will have an impact on house prices and availability.
If you’re a homeowner, investor, or potential first home buyer, these new policies will probably have an impact on your financial situation in one way or another.
Banning foreign investment, making changes to capital gains, and reducing immigration are all designed to slow demand and cool the housing market. While this may be a positive for people looking to buy their first home, it could be less than ideal for homeowners.
Done right, the new policies will simply stabilise the market without causing a sudden drop in prices. A significant drop would be devastating for homeowners who have invested everything they have into their home, and could leave people with a mortgage that’s worth more than their property.
Changing capital gains
Currently, if an investor buys a property and sells it off within two years, they are required to pay income tax on any capital gains. The Labour government aims to extend this to five years to discourage ‘flicking’ properties for quick profit. Because this tax is designed to target investors, it doesn’t apply to your principal property or family home.
If you’re an investor, this change may affect your purchases going forward. Investors who buy and renovate homes for quick sale will need to factor the tax into their calculations, and investors looking to rent may decide to hold on to properties for longer.
Affordability and accessibility
The limited number of homes available, along with a steadily growing population, has been a major driver of property prices. The Labour government plans to combat this by building 100,000 affordable homes over the next ten years. They plan to cut the red tape around new builds in order to speed up the process, and to address the shortage of qualified builders by subsidising training courses.
This plan is a positive for first home buyers, and could give those shut out of the housing market a chance to buy. However, training new builders and changing consent processes will take time, so it’s not necessarily a quick fix.
Want to find out how changes to the property market could affect you? Whether you’re a homeowner, investor, or first home buyer, get in touch with your financial adviser today for advice or to speak to a specialist lender get in touch with the experts at Core Finance.