New Zealand Prime Minister Jacinda Ardern has unveiled a suite of measures,including an end to tax deductibility for property investors,to help tame high house price growth.Credit:Getty
The system is similar to Australia’s negative gearing although here,investors are able to claim a tax deduction for mortgage interest against all their sources of income. Critics have claimed negative gearing has contributed to high house prices as property owners have lost tens of billions of dollars this decade alone.
House prices across New Zealand have soared over the past 12 months,even exceeding what has transpired in the Australian property market over the same period.
According to the Real Estate Institute of NZ,the median house price in Auckland has soared by 24.3 per cent to $NZ1.1 million ($1 million). Across the rest of the nation,the median house price has increased by 19.1 per cent to $665,000 ($616,000).
Prime Minister Jacinda Ardern said the package would increase housing supply and remove incentives for speculators,ultimately delivering a more sustainable housing market. “This is a package of both urgent and long-term measures that will increase housing supply,relieve pressure on the market and make it easier for first-home buyers,” she said.
“The housing crisis is a problem decades in the making that will take time to turn around,but these measures will make a difference.”
The axing of interest deductibility will apply to all investment properties other than new builds purchased on or before March 27. Over the next four years,deductibility will be removed for all existing investment properties.
Outside of the tax change,the government is setting up a $3.8 billion ($3.5 billion) infrastructure fund to accelerate housing supply. First home grants and loans will be expanded with higher income and house price caps.