Government Announced Changes to Property Market

Investors

  • Some of the most significant changes come for property investors.
  • Until now, Investors have been able to claim back the interest cost of a home loan against the rent received on the property, significantly reducing their tax bills.
  • No deductibility will be available for properties bought after March 27, and the amount that can be deducted will drop for other properties until it is phased out in four years’ time. New builds may be exempt, but Cabinet is yet to consult on this.
  • Under the government’s proposed housing rule changes, if you acquired a property before 27 March 2021, you could still claim interest on pre-existing loans as an expense against your residential property income, but this will be phased out over the next five tax years.

Owner-occupiers

  • If you live in a home that you own, you will not be directly affected, although you may no longer see the value of your property shooting up at the 20 per cent-a-year rate of recent times.
  • The bright-line test does not apply if you used a property as your main home for more than 50 per cent of the time you own it, or you use more than 50 per cent of the property’s area.
  • People can use an “own home” exclusion twice in any two-year period to avoid the bright-line test.

Bach owners

  • Baches were already covered by the bright-line test, and the impact of that is extended for any new baches bought as of this weekend.
  • The tax is paid at a person’s normal income tax rate, so if you are a high-income earner with a second property you are selling, you could potentially be taxed 39 per cent of the gains.
  • However, if you use the property as your main home for more than 50 per cent of the time you owned it, you may be able to avoid paying tax with the “own home” exclusion mentioned earlier.

First-home buyers

  • There are also changes to the First Home Grant and Loan schemes.
  • To qualify, buyers will now be able to earn up to $95,000 as single people and $150,000 as a couple.
  • Price caps increase from $650,000 to $700,000 in Auckland, $650,000 in Queenstown & Wellington, $600,000 in Nelson, Tauranga, Western Bay of Plenty, Hamilton, Waipa, Hastings & Napier, $550,000 in Christchurch, $550,000 in Dunedin and $500,000 through most of the rest of NZ.

Location

New builds

Existing properties

Old cap

New cap

Old cap

New cap

Auckland

$650,000

$700,000

$600,000

$625,000

Queenstown-Lakes

$650,000

$650,000

$600,000

$600,000

Wellington (Wellington City, Hutt City, Upper Hutt City, Porirua, K?piti Coast district)

$550,000

$650,000

$500,000

$550,000

Nelson City and Tasman district

$550,000

$600,000

$500,000

$525,000

Tauranga City and Western Bay of Plenty district

$550,000

$600,000

$500,000

$525,000

Hamilton City

$550,000

$600,000

$500,000

$525,000

Christchurch City, Selwyn and Waimakariri districts

$550,000

$550,000

$500,000

$500,000

Napier City, Hastings and Waip? districts

$500,000

$600,000

$400,000

$525,000

Waikato district

$500,000

$550,000

$400,000

$425,000

Dunedin City

$500,000

$550,000

$400,000

$425,000

Rest of New Zealand

$500,000

$500,000

$400,000

$400,000