New housing policies face criticism inside and outside the industry! 5 major changes ahead for the property market!

The announcement drew widespread opposition from people both inside and outside the industry, along with fierce criticism of the current Government’s ‘incompetence’ in dealing with the property market.

Prominent property commentator Ashley Church commented on the Government’s recently announced package of housing policies, saying: ‘The new housing policies have not only failed to affect the current housing market, but could also push New Zealand’s housing market into an abyss of further deterioration.’

‘Auckland house prices, in particular, will take off again after a brief pause. As prices continue to climb, first-home buyers will remain shut out. The new policies will also create a shortage of rental homes, pushing rents higher.’

Responses to the Government’s new policies from people inside and outside the industry, including investors, economists, tenants and property commentators, have been almost unanimous, using words such as ‘absurd’, ‘highly unusual’ and ‘unprecedented’ to describe their views.

The article said the Government claimed its package of measures would make it easier for first-home buyers to enter the property market. The most significant measures were extending the bright-line test to 10 years and removing investors’ right to deduct interest for tax purposes. These prompted a collective backlash from inside and outside the industry, with critics calling the plan naive and poorly considered. They agreed that the new housing policies would affect the market very differently from what the Government claimed. 

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Ashley Church said: ‘The new tax policies have not only faced widespread industry opposition; tenants have also come forward to acknowledge that they are directly in the firing line of the consequences. The unanimity of public opinion demonstrates that the Government’s move is wrong.’

Under intense public pressure, the Government tried last weekend to counter criticism with a new explanation, even claiming that ‘if these new policies backfire, more legislation will be introduced’.

Nice try, but wrong! The commentary argued that this Government had demonstrated its incompetence in dealing with the property market, claiming that ‘the Government is moving from the mistakes of four years ago towards another failure’.

A Westpac economist said: ‘This is not to say the new policies will have no effect on the current housing market. They will, and the impact will be chilling. The problem is that these effects have nothing to do with the issues the Government claims it is trying to address.’

In response to the new housing policies, prominent property commentator Ashley Church set out 5 reasons why New Zealand’s housing market would continue to deteriorate over the next few years:

• House prices will take off again

The Government’s measures will have no effect on house price inflation

‘Under the new policies, house prices will remain flat for a brief 2–3 months, perhaps even losing a little of their recent gains. But they will take off again in Auckland and continue climbing for several years. Most other parts of New Zealand will level off for a time, independently of the Government’s measures. Those measures will have no effect on house price inflation.’

2. First-home buyers will remain shut out of the market

‘The problem facing first-home buyers is not just house prices, but how to save a deposit. First-home buyers have borne the most direct impact of this round of price increases, yet the Government’s new policies do not address their savings problem — in other words, their income problem. This is also their most serious challenge. High house prices will continue to shut buyers out now and over the next few years.’

3. Investors will compete with first-home buyers

‘Under the new policies, few property investors will be rushing to build new rental homes, because the financial problems arising from the policies remain unresolved. If those problems are not addressed, investors will compete with first-home buyers.’ 

4. Fewer home buyers

Demand will outstrip supply in the rental market

‘Extending the bright-line period to 10 years will cause many existing and prospective investors to postpone buying a property. Removing investors’ interest deductibility will directly affect rental supply and become a serious problem over the next few years, as existing investors leave the market and the number of available rental homes stagnates.’

5. Fewer rental properties

Rents will rise beyond a certain level over the next few years 

‘As the supply of rental properties stagnates or declines, rents will be pushed higher. Combined with the removal of investors’ right to deduct interest, rent increases could exceed the “level” already caused by this Government’s policies.’

The article concluded that whether you are a homeowner, first-home buyer, investor or tenant, by 2024, conditions in the property market will have deteriorated markedly.