Big news from the Government yesterday! On Tuesday 23rd March, Prime Minister Jacinda Ardern, Housing Minister Megan Woods and Finance Minister Grant Robinson held a press conference and made some announcements regarding policy changes that primarily affect housing.
A summary of the announcements are:
- Effective from 27 March 2021 interest cannot be claimed as an expense for residential property investment, there are some exceptions for Property developers. From 27 March 2021 existing residential investment properties will have the amount of interest that can be claimed reduced over the next 4 years.
- The bright line test has been extended from 5 years to 10 years.
- The income caps for First Home Buyers has been increased to expand the number of people that qualify for the First Home Grant, single applicants can now earn up to $95,000 and couples can earn up to $150,000
- The Property price cap has increased in some regions to increase the chances of First Home Buyers finding a property that is within the cap.
- A Housing Acceleration fund of $350million has been given to Kainga Ora to help purchase land for building housing and to increase the pace of developments.
The full information about the Government Property Announcements and the new IRD rules can be found here
For further information on the increased price caps and the Housing Acceleration Fund go to the Kainga Ora website here.
We will be putting out further information about the announcements and the things that you may need to consider over the next few weeks. The important thing to do is to avoid any knee jerk reactions, and for you to understand fully what this may mean for you.
All in all, while the changes are significant and there may be many unintended consequences, the Government needed to do something. This government support will help enable the Reserve Bank to deal with the issues of First Home Buyers not being able to access properties, and to reduce the heat that Property Investors are putting on the market.