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Advisers slam housing market reforms

Advisers have criticised the Government's radical housing market reforms, which will have a significant impact on investors.

Wednesday, March 24th 2021, 9:06AM 1 Comment

Key changes earmarked by the Government include an extension to the bright-line test to 10 years, the removal of the deductibility of interest from rental income, and plans to limit interest-only lending.

There are also changes to the Government's First Home Loan scheme, with grant caps lifted and property price caps also raised. 

The reforms are aimed at solving the housing crisis, but have been criticised as investor-bashing.

David Windler of The Mortgage Supply Company, said the increased caps for new builds eligible under the First Home Loan scheme could prompt developers to lift their prices.

"I don't think it's necessarily going to do anything for first home buyers at all," he said. 

Windler predicts the changes for investors, such as the removal of interest deductibility, will hit "mum and dad investors the hardest".

He said investors would have to "find extra funds",  amid the interest deductibility changes.

NZFSG's Bruce Patten said the extension of the bright-line test was "ridiculous", and "a capital gains tax by stealth". 

He said the interest deductibility changes, to be phased in over several years, would be "a nightmare" for investors and their tax accountants to navigate.

Patten said the increases in the First Home Loan grants and caps were "inadequate", given 20% rises in house prices over the past two years. 

Sarah Bloxham, of Lets Talk Mortgages, who specialises in loans for first home buyers, agreed that the raised caps for Auckland homes were not good enough.

"It's not enough for existing houses in Auckland. That’s just no jump at all – you cant buy a garage in Auckland really for $625k."

Bloxham fears the changes for investors could drive landlords out of the industry.

"I'm already hearing of so many investors not buying any more due to more deposit needed. This then will push rents up due to less stock, and then we’ll end up with overcrowding or more homeless or more people going into state housing," she added.

Tags: Bright-line test government housing market interest-only mortgages Lending NZFSG

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Comments from our readers

On 25 March 2021 at 10:26 am JeffQV said:
How can this be good for FHB's? Rents will increase leaving less for saving. Supply will contract further as investors hold onto property. Interest rates are on the floor and no shortage of funds. Worst of all FHB's are back to a lottery for high LVR borrowing and nothing, absolutely nothing, is being done to assist here. Let the banks make commercial decisions and keep the meddling politicians out of it.

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Lender Flt 1yr 2yr 3yr
AIA 4.55 2.29 2.59 2.65
ANZ 4.44 2.89 3.25 3.39
ANZ Special - 2.29 2.69 2.79
ASB Bank 4.45 2.29 2.59 2.65
Basecorp Finance 5.49 - - -
Bluestone 3.49 3.34 2.99 3.34
BNZ - Classic - 2.29 2.59 2.79
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 2.89 3.19 3.39
BNZ - TotalMoney 4.55 - - -
Lender Flt 1yr 2yr 3yr
CFML Loans 4.95 - - -
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 2.95 3.45 -
Heartland Bank - Online 2.50 1.99 2.35 2.45
Heretaunga Building Society 4.99 3.40 3.50 -
HSBC Premier 4.49 2.25 2.35 2.65
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - 2.25 - -
ICBC 3.69 2.25 2.35 2.65
Kainga Ora 4.43 2.67 2.97 3.13
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 3.40 3.20 3.50 3.50
Kiwibank - Offset 3.40 - - -
Kiwibank Special 3.40 2.35 2.65 2.65
Liberty 5.69 - - -
Nelson Building Society 4.95 3.20 3.24 -
Pepper Essential - - - -
Resimac 3.39 3.35 2.99 3.35
Lender Flt 1yr 2yr 3yr
SBS Bank 4.54 2.79 ▲2.99 ▲3.29
SBS Bank Special - 2.29 ▲2.49 ▲2.79
Select Home Loans 3.49 3.34 2.99 3.34
The Co-operative Bank - First Home Special - 2.09 - -
The Co-operative Bank - Owner Occ 4.40 2.29 2.59 2.79
The Co-operative Bank - Standard 4.40 2.79 3.09 3.29
TSB Bank 5.34 3.09 3.29 3.45
TSB Special 4.54 2.29 2.49 2.65
Wairarapa Building Society 4.99 3.55 3.49 -
Westpac 4.59 3.09 3.29 3.39
Westpac - Offset 4.59 - - -
Lender Flt 1yr 2yr 3yr
Westpac Special - 2.29 2.69 2.79
Median 4.55 2.73 2.99 2.80

Last updated: 12 April 2021 8:56am

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