Let’s look at the details of the Government’s announcement today to see how they are either insignificant or will backfire. The Herald reports:
The First Home Grant is assistance of up to $5000 to buy an existing property or up to $10,000 for a new property.
The median house price has increased by $145,000 in the last 12 months. A $5,000 or $10,000 subsidy is pissing into the wind.
Today the Government announced that these income caps will be lifted from $85,000 to $95,000 for single buyers, and from $130,000 to $150,000 for two or more buyers. The changes to the house price and income caps will take effect on 1 April 2021
So a few thousand more people will be eligible for a subsidy that will be worth around 3% to 6% of the increase in house prices in the last year.
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 they will be lifted from $550,000 to $650,000 for new builds and from $500,000 to $550,000 for existing homes.
Farcical. Prices have gone up $145,000 and the caps are going up $25,000 to $50,000 for existing houses.
There are basically no existing houses for sale for under $550,000 in Wellington. The median price in even Porirua is almost $1 million.
These changes are meaningless.
The Government has announced it intends to extend the bright-line period to 10 years for residential property except for newly-built houses, which will stay at five years.
This means Grant Roberston has broken his word. Before the election:
When asked by Newstalk ZB’s Heather du Plessis-Allan if Labour would make any changes to the bright-line test if it was re-elected, Robertson said no.
When pressed on the rate or the years of the tax he again said no.
So now we know that you can’t trust the word of the Minister of Finance on tax, as just six months after he gave a commitment, they have done the opposite.
The impact of this change will be to decrease the number of houses available for sale as investors will ensure they keep them for ten years. So this will raise some revenue for the Government but also raise house prices.
Housing Minister Megan Woods said the new money for the housing acceleration fund – some $3.8b – will help greenlight tens of thousands of house builds in the short to medium term.
Hmmn. Spend a couple of billion and you get tens of thousands of houses in return. Where have we heard that before? Oh yes, Kiwibuild. Back then it was 100,000 houses for $2 billion. Now it is tens of thousands of houses for $3.8 billion.
They promised 100,000 houses by 2028 and so far they have managed 811 or not even 1% after three years.
Meanwhile, the Government will get rid of the interest deductibility loophole – a rule which allows property owners to claim interest on loans used for residential properties as an expense against their income from those properties.
First of all it is not a fucking loophole. Any journalist who calls it a loophole should be ashamed.
Claiming business costs vs business income is a fundamental part of the tax code. What the Government is doing is not closing a loophole. They are making an exception to a normal tax rule.
And what will be the impact of landlords not able to claim mortgage costs against their rental income? Well they’ll need more income, so will increase rents. Rents go up, and homelessness increases. So their policy is to make more people homeless and make it more expensive to rent, in return for more revenue for the Crown.
So what have others said. The TOP Leader, Shai Navot commented:
“What is more likely is rents will rise so landlords can make the same returns they were making before these tax changes. Or they will choose to sell, and the supply of rentals will reduce even further. However you slice this, renters will be the real losers in these policy changes.
Michael Reddell points out there is nothing in there to fix the real problem – supply of land.
If the Government was serious about reducing house prices as opposed to increasing tax revenue, they would be freeing up the land, starting in Auckland. It was in fact their policy in 2017, but they never did it.