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New Zealand moves to rein in runaway housing market with billion dollar plan


Jacinda Ardern announces more support for first homebuyers and measures to dampen property speculation but admits its no ‘silver bullet’

House prices in New Zealand have been driven up 23% in just 12 months. Photograph: Nazar Abbas Photography/Getty Images
 in Wellington

The New Zealand government has announced a series of billion-dollar measures aimed at tackling the country’s housing crisis as prime minister Jacinda Ardern warns there is “no silver bullet”.

House prices have been driven up 23% in just 12 months, far ahead of wage growth, pushing younger and lower-income buyers out of the market. On Tuesday morning Ardern announced a package intended to address problems of housing supply and demand, and help shift the balance away from investors.

“New Zealand’s housing crisis is longstanding and will take time to turn around. There is no silver bullet … [but] the need for further action is clear,” said Ardern. “The last thing our economy and homeowners needs is a dangerous housing bubble, but a number of indicators point towards that risk.

First-homebuyers will be able to access more government help from 1 April, with the income cap on the government’s First Home Grants and loans lifted from $85,000 to $95,000 for single buyers, and from $130,000 to $150,000 for two or more buyers. Regional price caps have also been increased to reflect increased prices.

Measures have also been introduced to dampen speculation, after property investment reached record-highs due to low interest rates and New Zealand’s speedy economic recovery from the pandemic last year. In 2020 15,000 people who already owned five or more properties, bought houses.

The finance minister, Grant Robertson, announced an extension to the “bright-line test” – the holding time of investment properties to get tax offsets – from five to 10 years to curb the flipping of residential homes by speculators. New-build homes would be exempt to encourage more construction.

The government has also removed the ability for property investors to offset their interest expenses against their rental income when calculating tax. More loopholes that favoured investors would be closed, with the Reserve Bank due to report back on possible measures in May.

“Housing bubbles are unstable by their very nature, and we cannot afford to put the current economic recovery at risk by allowing house prices to spiral out of control,” said Robertson.

In the wake of the notable failure of its flagship KiwiBuild project to build 100,000 affordable homes, scrapped in 2019, the government also announced $3.8bn in investment in basic infrastructure to speed up construction on new builds.

The housing minister, Megan Woods, said there was a “clear market failure” to build enough housing, and a “significant missing link” was necessary groundwork such as roads and pipes.

“We’ve found out just how broken the system is for getting new housing, especially affordable housing, built. … It’s a stumbling block that has stopped developers and councils in their tracks.” The government will also extend an apprenticeship initiative to support training in trades.

Much of the spending has been brought forward from May’s budget.

“This package contains both urgent measures and long-term solutions,” said Ardern. “It seeks to de-escalate the current risks in the housing market while setting up a pipeline of affordable new homes to built in the coming years. It is a balanced approach.”

Calls have been mounting for the government to act on housing, both from aspiring homeowners shut out of the market and international bodies.

The International Monetary Fund warned earlier this month that New Zealand’s rising house prices were unsustainable and risked triggering an “eventual, pronounced correction”. The Reserve Bank had already tightened mortgage lending rules, and has been asked to consider housing while setting policies.

Almost 1% of the population is ranked as homeless or “severely housing deprived”. It’s the highest rate among OECD nations, and almost twice that of neighbouring Australia.

Julie Anne Genter, the Green party’s finance spokesperson, tweeted about news of landlord bosses expressing “shock and dismay” at the announced changes with the caption: “Cry me a river.”

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