This week (March 23, 2021) the Labour government announced their plan to tackle the current housing issues in New Zealand. The policies focused on increasing the supply of houses, assisting first home buyers while at the same time slowing down demand from investors. People have been asking us how this could affect them here in the region, so we put together a summary for you with some links to information you might find helpful.
From Thursday, 1 April 2021, the income caps will increase and the house price caps will increase in targeted areas, including Nelson.
The income cap (maximum yearly income before tax) for a single person will increase from $85,000 to $95,000. For two people, it will increase from a combined maximum yearly income before tax of $130,000 to $150,000.
In Nelson and Tasman regions the house price cap will increase from $500,000 to $525,000 for an existing property and from $550,000 to $600,000 for a new property.
Check if you are eligible for a first home loan here: https://kaingaora.govt.nz/home-ownership/first-home-loan/check-you-are-eligible-for-first-home-loan/
The bright-line test means if you sell a residential property within a set period after acquiring it, you will be required to pay income tax on any profit made through the property increasing in value. The current bright-line period is 5 years. The Government has announced it intends to extend the bright-line period to 10 years for residential property except newly built houses (new builds) which will remain at 5 years. This does not include your family home or inherited property.
This change will be effective from Saturday, 27 March 2021 except for new builds acquired before this date.
We recommend getting in touch with the IRD directly with specific questions.
The Housing Acceleration Fund aims to increase the supply of houses and improve affordability for home buyers and renters.
The key components of the Fund are:
The Government will also help Kāinga Ora to borrow an additional $2 billion to “assist in bringing a range of development forward through strategic land purchases”.
The Government is going to change the rules that allow property owners to claim interest on loans used for residential properties as an expense against their income from those properties. The legislation will apply from 1 October 2021.
Property investors will no longer be able to offset their interest expenses against their rental income when calculating their tax. Interest deductions on residential investment property acquired on or after 27 March 2021 will not be allowed from 1 October 2021. Interest on loans for properties acquired before 27 March 2021 can still be claimed as an expense. However, the amount someone can claim will be reduced over the next four income years until it is completely phased out by April 1, 2025.
Property developers (who pay tax on the sale of property) will not be affected by this change. They will still be able to claim interest as an expense.
Again, we would recommend talking to the IRD with specific questions.
We have to mention the extension to the apprenticeship boost programme also to August 2022 meaning hopefully lots of new people entering the trades which in turn will assist in more properties being built.
For a full run down and more information you can go directly to the Labour website here: https://www.labour.org.nz/news-housing-2021-plan-faq
We hope this helps make a bit of sense of the announcements and what it might mean to you. Do get in touch if you want to have a chat to us about anything raised here or relating to real estate in general. We're always happy to help.