Apr 20, 2021 4:25:47 PM

New Zealand Property Market Update | April 2021

Topics: Selling, Investment Property, First Home Buyer 0

From 01 April 2021, a number of government-led changes have come into effect aimed at fixing New Zealand’s housing crisis and slowing rampant house price inflation. Along with a considerable funding boost for new home builds and measures designed to slow down investors, the First Home Grant and First Home Loan income and house price caps have increased to assist first home buyers. Here’s a breakdown of the measures government has initiated.


First Home Grant and First Home Loan

In an effort to open up access to more first home buyers, income caps and house price caps have increased under the First Home Grant and First Home Loan.

For first home buyers who have contributed to KiwiSaver for more than 3 years, the First Home Grant provides assistance of up to $5,000 per applicant to buy an existing property, or up to $10,000 per applicant to buy a new property, while under the First Home Loan, first home buyers with just 5 per cent deposit can apply for a mortgage. 

From 1 April 2021, income caps for first home buyers accessing either the First Home Grant or First Home Loan have been lifted from $85,000 to $95,000 for single buyers, and from $130,000 to $150,000 for two or more buyers.

House price caps on the value of properties being bought using either the grant or loan have also increased as of 1 April 2021.

In Auckland, these caps will be lifted from $650,000 to $700,000 for new builds and from $600,000 to $625,000 for existing homes.

In Wellington, Hutt City, Upper Hutt City, Porirua house price caps have lifted from $550,000 to $650,000 for new builds and from $500,000 to $550,000 for existing homes. 

In Nelson City, Tasman District, Tauranga City, Western Bay of Plenty District, Hamilton City house price caps have lifted from $550,000 $600,000 for new builds and from $500,000 to $525,000 for existing homes.

In Waikato District and Dunedin City, these caps will lift from $500,000 to $550,000 for new builds and from $400,000 to $425,000 for existing homes.

Changes to the bright-line test and tax deductibility

The bright-line test was originally introduced as a simpler way of applying an income tax on speculators flipping properties. It applies to properties purchased after March 29, 2018 and sold within 5 years, and properties bought from March 27, 2021 and sold within 10 years.

Under the bright-line test, properties sold within these time frames are subject to a tax levied on any financial gain made on the sale of the property. The bright-line test excludes homes used as a main residence and properties that are inherited, but new builds may still be captured under the 5-year bright-line test.

A further change likely to impact investors is the ability to claim back the interest cost of a home loan against rent received on a rental property, which in the past has significantly reduced their tax bills. Going forward, deductions will not be allowed on properties bought after March 27, 2021, and the amount that can be claimed on properties bought earlier will be reduced to zero over a period of four years.

The Housing Acceleration Fund

Government has committed an initial $3.8 billion to the Housing Acceleration Fund, in addition to the $350 million that has already been committed to the Residential Development Response Fund.

Aimed at increasing the supply of houses, particularly affordable homes, The Fund is critical to addressing New Zealand’s housing affordability issues. It will focus on priority locations where high housing need has been identified, and will increase the pace and scale of housing delivery.

Options for first home buyers and investors alike

If 2021 is your year for property – whether you’re a first home buyer looking to climb the property ladder or an investor wanting to buy a rental property or holiday home – get in touch with a Mortgage Express mortgage adviser. Mortgage Express advisers have access to a panel of both bank and non-bank lenders and have experience in working closely with both first home buyers and investors.

A Mortgage Express adviser can help you find the right finance deal to suit your specific needs, and can guide you through the mortgage maze to ensure you have the information you need to make informed decisions about your financial future.