Kiwibank

PHOTO: SUPPLIED The team of Kiwibank economists, headed by Jarrod Kerr, is forecasting 25 per cent house price growth rate by the middle of the year, despite Government housing policies announced last week.

  • New Zealand’s housing market desperately needs an injection of affordable, sustainable homes. We’re short 80,000 homes. The Govt’s announcements today falls short. It’s merely a drop in the leaky bucket.
  • The most effective measures announced today are aimed at demand. The Bright-line test will be extended from 5 years to 10, excluding existing investments (before March 27th) and new builds. The Govt has deliberately given a tax advantage on new builds, hopefully with interest deductibility.
  • Interest deductibility on existing dwellings will be scrapped from March 27th, or phased out over four years on existing investment properties. The Govt has yet to decide on interest deductibility for new builds.
  • On the supply side, a minuscule $3.8bn will be set aside for a new “accelerator” fund which councils can access for housing infrastructure needs. The fund will be funded by normal Govt debt issuance. The size of the fund is tiny, and hard to take seriously. We know it will grow; it must. But we should have seen a more respectable figure the fund could grow into, rather than a 3.8 figure the fund will grow out of in 5 minutes.
  • Kāinga Ora will issue NZ$2bn more debt for land purchases, separate to the housing accelerator fund. They can at least build homes.
  • House price caps will be increased on the Home Start Grant and First Home Loans. The lower quartile house price has increased dramatically in the last year alone. With 5% deposits being eligible for singles on $95k (up from $85k) and $150k for couples (up from $130k).
  • We were pleased to see the Govt tilting tax advantages in favour of new dwellings. Investors will be more willing to build, and more willing to add to the housing stock, which is in short supply.

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