What the government’s housing plan means for you
The nuts and bolts of the government’s housing plan.
The nuts and bolts of the government’s housing plan.
Last week, the government announced its plan to tackle the country’s housing crisis. The changes are intended to tilt the playing field towards first-home buyers and away from investors.
The key changes:
The income cap has risen for the First Home Grant and First Home Loan schemes from $85,000 to $95,000 for single buyers and from $130,000 to $150,000 for two or more buyers.
The First Home Grant gives buyers $5000 to buy an existing house or $10,000 for a new build. The First Home Loan allows first-timers to apply for a mortgage with only a 5 percent deposit instead of the 20 percent lenders usually require.
The price cap on houses that can be bought through these schemes has also been lifted. The cap differs between regions and whether you’re buying an existing or new dwelling.
You’ll now need to hold on to a house for more than 10 years if you want to avoid paying income tax on the profit when you sell. That’s up from 5 years. The move is meant to make flipping properties less lucrative.
You also won’t be able to offset your mortgage interest against rental income as landlords have previously done.
Landlords have been able to subtract the interest they pay on their mortgage from rental earnings and only pay tax on the income left. This tax break is being phased out. From 1 October 2021, interest deductibility won’t be allowed for investment properties bought on or after 27 March.
Interest deductibility will be phased out for other existing investment properties over the next four years.
You’re the type of person the government wants to encourage. The new-bright line rule doesn’t apply to you – you’ll only pay income tax if you sell within the first 5 years of owning the house.
The government will also be consulting on exempting new builds from changes to the mortgage interest deductibility rules.
The changes to the so-called bright-line test apply to property bought on or after 27 March 2021.
Property purchased between 29 March 2018 and 26 March 2021 will continue to be subject to a 5-year bright-line test – so you’ll only pay income tax if you sell within the first 5 years.
The changes for landlords mean owning a rental will no longer be as lucrative. Some landlords may try to hike rents to make up for the financial hit.
Since 12 August 2020, rent increases have been limited to once every 12 months, up from every six months. The law doesn’t limit how much rent can be increased by. However, you can apply to the Tenancy Tribunal if you think your rent is a lot higher compared with similar houses in the same area.
The tribunal can make an order for the rent to be reduced if it finds you’re right.
Consumer NZ is non-profit. To help us get a fairer deal for all New Zealand consumers you can make a donation. We’ll use your contribution to investigate consumer issues and work for positive change.
Keep up-to-date with Consumer's latest news, investigations and product and service reviews, plus join the Consumer panel with invitations to take part in surveys.
Member comments
Get access to comment