2021 in review

Addressing the housing crisis: New Zealand Government releases its 2021–2024 public housing plan. On the morning of 21 January, the New Zealand Government announced its 2021–2024 public housing plan (Public Housing Plan 2021–2024), with Prime Minister Jacinda Ardern pledging to tackle New Zealand's housing crisis.

The big picture – news updates

{ad}

Addressing the housing crisis: New Zealand Government releases its 2021–2024 public housing plan

On the morning of 21 January, the New Zealand Government announced its 2021–2024 public housing plan (Public Housing Plan 2021–2024), with Prime Minister Jacinda Ardern pledging to tackle New Zealand's housing crisis.

The plan announced that more than 13,000 new public and transitional homes would be built over the next four years, with funding for 8,000 already included in the Government's Budget last year. Of these 8000 homes, 6000 would be public housing and 2000 transitional housing.

Plans for new public housing would continue to focus mainly on major cities, with Auckland receiving the largest number, followed by Wellington and Canterbury. By the end of 2024, the Auckland region would have 40,000 public and transitional homes, while Wellington and Canterbury would each have around 10,000.

The plan would also specifically target regional centres with severe public housing shortages, including Whanganui, Palmerston North, Napier, Hastings and Gisborne. In Gisborne alone, for example, house prices rose 30% over the past year, moving increasingly beyond what local residents can afford.

However, even the additional 13,000 homes planned for construction would not meet the needs of the current number of public housing applicants. The waiting list continues to grow, with nearly 22500 people now on it.

New Zealand's toughest-ever tenancy law takes effect

On 11 February, the Residential Tenancies Amendment Act 2020, regarded as New Zealand's toughest-ever tenancy law, officially took effect. It would have a substantial impact on landlords and tenants, with many landlords even beginning to reconsider their investment plans.

From 11 February 2021, landlords would no longer be able to end a periodic tenancy without a reason by giving 90 days' notice. They could terminate a tenancy only on specified grounds, and notice periods would also change. For example, 90 days' notice would apply when a landlord wanted to sell the property, while 63 days' notice would apply when the landlord or a family member wanted to live in it.

When a fixed-term tenancy expires, it will automatically become a periodic tenancy unless the parties agree otherwise or the tenant gives 28 days' notice to end it. Landlords must then follow the rules for periodic tenancies and cannot terminate them without grounds. Tenants under all tenancy agreements can request an assignment or subletting arrangement, and landlords must consider these requests and cannot refuse without a reason.

Landlords must agree to tenants' requests for minor changes to a property, although they may impose reasonable conditions on how the changes are made. At the end of the tenancy, tenants must remove the changes made during the tenancy and restore the property. If a tenant requests fibre broadband and the network provider can install it free of charge, the landlord must agree to the installation.

Landlords cannot advertise a rental property without stating the rent: every property must have an advertised price. They also cannot invite or encourage tenants to bid on rent.

When a tenancy dispute goes before the Tenancy Tribunal, tenants can request privacy protection to avoid being blacklisted.

Landlords will be required to keep more detailed tenancy records, and failing to provide a written tenancy agreement will be considered unlawful. If required, landlords must also have records of all expenses and repair receipts ready to submit to the Ministry of Business, Innovation and Employment (MBIE).

Major changes: Government announces four new property market measures

In a major housing market announcement this year, Prime Minister Jacinda Ardern and the Ministers of Housing, Finance and Revenue jointly unveiled a series of new property market measures at a press conference held today, at 9h on the morning of 23 March. Ardern said the Government would strengthen its intervention in the housing market by increasing supply and curbing property speculation, among other measures.

The Government's announcement set out 4 main new housing market policies, as follows:

From 27 March, the bright-line test period extends from 5 years to 10 years: Properties purchased on or after 27 March will be subject to a 10-year bright-line test. This means gains from sales within the following 10 years will be taxed at 33% and 39%. Many experts regard this as a capital gains tax in another form. Notably, the test period for newly built investment properties will remain at 5 years, while family homes and inherited properties will remain exempt.

Closing the interest deductibility loophole: Interest expenses on investment properties purchased after 27 March will no longer be deductible against rental income for tax purposes. For example, under the current rules, if an investor earns NZ$20,000 in annual rent from an investment property and pays NZ$12,000 in mortgage interest, only NZ$8000 of the rental income is taxable. Under the new rules announced today, however, the full NZ$20,000 in rent will be taxable. For properties purchased before 27 March, the rule will be phased in across all investment properties over 4 years from 1 October, with the deductible amount gradually reducing.

See the table below for the detailed deduction rules:

Financial year	Percentage of interest expenses deductible
1 April 2020 to 31 March 2021	100%
1 April 2021 to 31 March 2022 (Transitional year)	1 April 2021 to 30 September 2021 – 100% 1 October 2021 to 31 March 2022 – 75%
1 April 2022 to 31 March 2023	75%
1 April 2023 to 31 March 2024	50%
1 April 2024 to 31 March 2025	25%
After 1 April 2025	0%

Higher income caps for first-home buyer assistance: The annual income cap for a single buyer applying for a First Home Grant and loan has risen from NZ$85,000 to NZ$95,000. For two or more buyers, the cap has increased from NZ$130,000 to NZ$150,000. Notably, the First Home Loan requires a deposit of only 5%. These loans are issued by selected banks, building societies and credit unions, and underwritten by Housing and Communities.

NZ$3,800,000,000 committed to a housing supply acceleration fund: Housing Minister Megan Woods said the Government would allocate NZ$3,800,000,000 to fund housing development and infrastructure. This NZ$3,800,000,000 investment would primarily address New Zealand's current housing supply shortage, targeting areas facing housing shortages and significant affordability pressures. The Government also announced NZ$2,000,000,000 in borrowing for Kāinga Ora (Homes and Communities) to expand land purchases and increase housing supply.

Government help with deposits: a blessing for first-home buyers?

Against a backdrop of soaring house prices, the Labour Government introduced a series of policies to boost first-home buyers' confidence. As part of its NZ$400,000,000 Progressive Home Ownership Fund, Kāinga Ora operates the First Home Partner shared home ownership scheme. Kāinga Ora brings together staff and other resources from Kiwi Build, Housing New Zealand and its development subsidiary, Hobsonville Land Company, to achieve the Government's priority objectives more quickly. These include addressing housing supply and demand and making homes more affordable for New Zealanders.

The scheme allows first-home buyers to purchase their first home jointly with Kāinga Ora. Whether buying a new home or off the plans, buyers with a deposit of 5% or more can receive funding from Kāinga Ora of up to 25% of the purchase price or NZ$200,000, whichever is lower. The buyer and Kāinga Ora will jointly own the property. The central requirement is that buyers gradually purchase Kāinga Ora's share over the following years. If it takes more than 15 years to buy out that share, an annual administration fee of NZ$2250 will apply, adjusted for inflation.

Applicants must meet specific eligibility requirements. For example, their total household income before tax must be below NZ$130,000. They must be first-home buyers, or currently own no home and have realisable assets worth no more than 20% of the house price cap for the area where they are buying. They must also have mortgage approval from a participating bank, BNZ or Westpac, among other requirements.

The scheme also has specific restrictions, including: Homeowners cannot rent out the property, but may take in flatmates or boarders. While Kāinga Ora owns a share, homeowners must obtain its approval before selling, and sale proceeds will be distributed according to each party's ownership share. Homeowners must also commit to living in the property for at least three years. If they need to move earlier, they must apply to Kāinga Ora, which will assess the request on a case-by-case basis. They must obtain Kāinga Ora's approval before renovating or undertaking any building work, and must allow Kāinga Ora to enter and inspect the property for maintenance and repairs.

CCCFA takes effect, making borrowing harder

From 1 December, amendments to the Credit Contracts and Consumer Finance Act (CCCFA) will officially take effect. The new rules apply to all new lending and increases to existing credit, such as loans for home renovations or higher credit card limits.

The amendments increase banks' responsibilities and obligations, requiring all lenders to spend more time collecting and checking borrowers' details and information before approving loans. As a result, first-home buyers, older borrowers and business owners will find it harder to obtain finance.

Independent economist Tony Alexander said his latest survey of mortgage advisers showed that 93% reported greater difficulty obtaining bank loans. ‘That 93% figure provides grounds for describing the current state of home lending as a “credit crunch”,’ he said.

New Zealand Bankers' Association chief executive Roger Beaumont said the CCCFA changes meant anyone seeking a loan would need to provide banks with more information about their financial circumstances, while banks would have to do more work to verify its accuracy. ‘This means it will take longer to get a loan, and more applications may be declined, because looking more deeply into your finances may reveal a lower ability to repay.’

Resource Management Act amendments pass final reading in Parliament

On 14 December, amendments to the Resource Management Act passed their final reading in Parliament, making it easier to build homes in New Zealand's major cities.

The legislation allows homes up to three storeys high to be built on most land without resource consent. Previously, district plans generally allowed only a single home of up to two storeys on residential land. In practice, this brings forward implementation of parts of the previously proposed National Policy Statement on Urban Development (NPS-UD) by at least a year.

The legislation will reduce resource consent requirements for new homes, simplify the approval process where consent is required, and avoid the public notification and consultation stage. Certain areas with heritage or cultural significance will be exempt from the changes, while some traditionally affluent neighbourhoods and sought-after school zones will also remain outside their scope.

PwC modelling predicts that the new legislation will lead to around 48,000 to 105,000 new homes being built in New Zealand over the next five to eight years.

2021: New Zealand's average house price exceeds NZ$1,000,000 for the first time

The latest House Price Index (HPI) from New Zealand property valuation firm CoreLogic shows that 2021 was a record year for the country's property market. Annual growth reached 27.6%, surpassing the previous record increase of 24.4% set in 2003. The average value of a New Zealand home crossed the NZ$1,000,000 threshold for the first time, reaching NZ$1,006,632.

CoreLogic NZ head of research Nick Goodall said: ‘2021 was certainly an extraordinary year for New Zealand's property market. Low interest rates and most borrowers' continued access to finance were key factors behind sustained strong demand for residential property.’ Goodall said that although monthly value growth remained strong, annual growth had slowed for a second consecutive month after peaking at 28.8% at the end of October 2021, highlighting that growth could not continue indefinitely.

Index results for New Zealand's main urban centres show that momentum continued through the final month of 2021, although Tauranga and Wellington saw some dramatic changes in annual growth. Tauranga's annual growth slowed from 35.8% at the end of November last year to 30.0% at the end of December, while Wellington's fell from 33.5% to 30.6% over the same period. Auckland's annual growth also dipped slightly, from 25.7% in November last year to 24.9% in December.

Christchurch was an exception, continuing to experience very strong monthly growth. Values rose a further 3.5% in December last year, taking annual growth to 38.0% and extending the record set the previous month. This gave Christchurch the highest annual growth of any New Zealand city.

Reserve Bank of New Zealand releases year-end property figures for 2021

The Reserve Bank of New Zealand's M10 statistics indicate that the value of all New Zealand housing may have reached NZ$16,750 by the end of 2021, equivalent to 4.8 times GDP, compared with 4.3 times in 2020 and 3.7 times in 2019.

New Zealand house prices rose 24% nationwide in 2021, maintaining strong momentum after increases of 19% in 2020 and 12% in 2019. House sales volumes also increased, rising 9.4% in 2021 and 6.4% in 2020, after actually falling by 1% in 2019.

Over the past year, banks' mortgage lending exceeded NZ$320,000,000,000, with the total increasing 10.7%. Growth was 8.2% in 2020 and 6.9% in 2019.

New Zealand's economy has become more concentrated in a single sector. Total residential mortgage lending by all New Zealand banks has climbed to 93.1% of GDP, or 94.5% when housing debt from non-bank lenders is included.

The official response to the coronavirus emergency pushed interest rates lower. Mortgage rates fell from their 2021 lows and reached their lowest-ever level in July 2021. The Reserve Bank of New Zealand then began signalling that it needed to start normalising its emergency monetary policy. OCR increases on 6 October and 24 November lifted the rate from its emergency level of 0.25% to 0.75%. Further increases are expected in 2022 and 2023, potentially taking it above 1.5%, with the extent of increases largely dependent on the health of the labour market.

Second-largest fall in 35 years as the pandemic hits New Zealand's third-quarter GDP (Place this article before the CCCFA article）

Figures released by Stats NZ on 16 December showed that GDP fell 3.7% in the third quarter of 2021, the second-largest decline since the series began in 1986. This followed GDP growth of 2.4% in the second quarter of 2021.

The result reflected a widespread decline in economic activity caused by alert level restrictions and lockdown during the latter part of the quarter.

Stats NZ said some industries were more severely affected by lockdown restrictions in the third quarter. ‘The four industries with the largest falls in activity were retail, accommodation and food services; manufacturing; construction; and arts and recreation. These were the industries most affected by lockdown measures,’ spokesperson Ruvani Ratnayake said.

In the second quarter of 2020, New Zealand's GDP fell 10.3% as the country emerged from its first level 4 lockdown.

‘There were fewer days at higher alert levels last quarter, and border restrictions had already been in place for a long time. Some businesses may also have adapted to higher alert levels and been better prepared than during the first lockdown,’ Ratnayake said.

2021: Top luxury home sales revealed! Auckland accounts for 8 of the top 11 (Place this article before the Reserve Bank of New Zealand article）

On 26 December, a list of New Zealand's top 11 residential and lifestyle property sales for 2021 was released. The list was compiled by Kelvin Davidson, chief property economist at property data company CoreLogic.

Of the top 11 properties, 8 were in Auckland and the rest near Queenstown, with combined sales exceeding NZ$140,000,000. Auckland's Herne Bay and Remuera remained true luxury home enclaves, while several larger properties near Queenstown also made the list.

NZ$22,000,000: A standalone home on Argyle St in Herne Bay, sold on 28 June. Its auction price set the year's highest record.
NZ$19,750,000: A luxurious colonial-style home on Victoria Ave in Remuera, sold in early December. Formerly the site of Bolivia's honorary consulate, it had been extensively renovated by the sellers.
NZ$18,200,000: A 9.1-hectare rural property on Mooney Rd in Speargrass Flat, outside Arrowtown in the South Island, sold on 21 August. With a natural pond and tennis court, it is one of the area's most desirable rural properties.

NZ$16,100,000: A home on Forestline Rise in Ben Lomond, between Queenstown and Glenorchy, sold on 25 May.

NZ$15,600,000: A standalone home on Victoria Ave in Remuera, sold on 10 June. Records show the owner was Zhuohe Zhou, whose name suggests a Chinese background. The property has a 2580-square-metre site and a 663-square-metre home with 5 bedrooms and 5 bathrooms.

NZ$14,500,000: A 3.03-hectare rural property on Wilding Rd in Lake Hayes, in the Queenstown area, sold on 12 August. Built in 2005, the large modernist home has five bedrooms, four bathrooms and four parking spaces.

NZ$13,200,000: A standalone home on Minnehaha Ave in Takapuna, Auckland, sold on 16 August. The 612-square-metre home was designed by architect Ron Dijkmans more than 20 years ago. Along with five bedrooms, it has seven bathrooms, a library, an indoor swimming pool, a games room with a wraparound deck and a garage for four cars.

NZ$12,500,000: A standalone home on Karori Cres in Orākei, Auckland, sold on 13 April. The large home offers spectacular views of the Hauraki Gulf islands.

NZ$12,000,000: A standalone home on Hamilton Rd in Herne Bay, sold on 5 October.

NZ$11,020,000: A standalone home on Victoria Ave in Remuera, sold on 28 May. Entering this luxurious contemporary property feels like arriving at a grand estate. The northwest-facing home has more than 500 square metres of floor area on a 3000-square-metre site, with a swimming pool, expansive lawns, a tennis court and private woodland.

NZ$11,000,000: A standalone home on Godden Cres in Mission Bay, sold on 19 April. The home spans more than 640 square metres around a private pool, set among more than 2000 square metres of level lawns and gardens.

Pandemic hits New Zealand's economy, with cautious optimism for 2022 (Place this article last）

The New Zealand Treasury said the pandemic had dealt a greater-than-expected blow to the Government's finances, but a faster, stronger rebound was expected to deliver a fiscal surplus and lower debt.

The Half Year Economic and Fiscal Update (HYEFU) showed that the budget deficit for the current financial year was expected to widen, as increased business subsidy support outpaced growth in tax revenue.

Key economic figures(Year ending June 2022 versus Budget 2021 forecasts)

GDP：0.8% vs 3.2%

Inflation: 5.1% versus 1.7%

Unemployment rate: 3.2% versus 4.0%

House price inflation: 10.4% versus 0.9%

Inflation was expected to peak at 5.6% in the first quarter of 2022, compared with the previously forecast peak of 4.9%.

By comparison, wage growth was expected to peak at 4.6% in the fourth quarter of 2023, before gradually easing to 4.2%. In 2023, wage growth was forecast to be 4.5%, exceeding inflation of 3.1%.

Key fiscal figures(Year ending June 2022 versus Budget 2021 forecasts, in NZ dollars)

Core tax revenue: 102,600,000,000 versus 93,200,000,000

Core expenditure: 128,000,000,000 versus 114,700,000,000

OBEGAL (operating balance before gains and losses): -20,800,000,000 versus -18,400,000,000

Net debt as a share of GDP: 37.6% versus 43.8%

Finance Minister Grant Robertson said New Zealand's economy had been performing well, but the Delta outbreak had put it to the test. ‘With a positive economic and fiscal outlook, we can look ahead to 2022 with cautious optimism.’ However, supply chain disruptions, rising inflation and the pandemic could affect the forecasts.