New Zealand is fabricating rules to make property assumptions less alluring and augment low housing affordability. The real estate speculations are an essential issue for Prime Minister Jacinda Ardern as she targets to cool the country’s boiling housing market.
New Zealand‘s real estate regulations
The newly drafted law restricts real estate investors in New Zealand from abstracting mortgage interest from their incomes and will come into full functioning from 1st October 2021. This regulation was first introduced in March 2021 and is a part of a surfeit of real estate regulations issued in New Zealand.
Grant Robertson, Finance Minister, stated that taxation is neither the cause nor the answer to the housing challenge. However, he did indicate that it does have a direct influence which made the Government react in the way that it did.
New Zealand’s comparative success in dealing with the pandemic, factually low interest rates, and billions of dollars in government spurs have caused a surge in real estate prices as investors return to investing in New Zealand’s real estate market.
In August 2021, housing rates in New Zealand surged to approximately 26%, making it the least affordable country to live in, among the OECD countries. Marginalized communities faced a detrimental impact and the country’s Human Rights Commission released an investigation to address the housing predicament.
In March 2021, the New Zealand government levied new taxes to investors, and authorities sought support for first-home purchasers by increasing the supply of reasonably priced houses.
Robertson stated that these measures have aided in reducing excitement amongst investors to purchase existing homes. Therefore, a balanced playing field was facilitated for first-home purchasers.
The newly drafted regulations will restrict the accessibility to tax reductions for interest expenses witnessed by residential real estate investors who acquired property on or after 27th March 2021.
Interest reductions for prevailing residential real estate that were acquired before 27th March 2021, will be disposed of from 1st October 2021 to 31st March 2025.
The regulations do not have any effect on main family homes and new constructions.