Changes in housing policy to come
Friday 20 October 2017
New Zealand's new Prime Minister Jacinda Ardern
New Zealand may now have a government but uncertainty over what that might mean for the housing market is set to linger for some time.
By Miriam Bell
Last night, nearly a month after the election, NZ First leader Winston Peters announced his party’s decision on who it would go into coalition with to form the next government.
New Zealand will have a government made up of a Labour-NZ First coalition with support from the Green Party.
No policy positions have been announced yet but – based on announcements made during the election campaign - commentators believe there are likely to be major changes in a number of housing market related areas.
These include house building which will see greater government involvement through the Kiwibuild programme; foreign investment which is likely to include a ban on buying existing dwellings; immigration which is set to be reduced and become more targeted; and monetary policy.
ANZ senior economist Philip Borkin said Labour campaigned on more interventionist housing policies – like extension of the bright line test, non-resident purchasing restrictions, ring-fencing of tax losses - as well as migration restrictions that are well aligned with NZ First views.
“These policies together have the potential to keep housing market sentiment more contained than would have been the case otherwise.”
However, housing market activity has clearly weakened a lot already and, in ANZ’s view, predominantly for fundamental reasons more than election uncertainty, he said.
This makes suggestions that a housing market crash will result from the new government and its policies seem implausible – particularly given the ongoing imbalance in supply and demand which underlies the housing market.
The Kiwibuild programme, which aims to build 10,000 new houses a year, is unlikely to have a significant impact on this imbalance, if only because the existing shortfall is so big.
Further, it has been widely noted that construction industry constraints and the ongoing tightening up of bank lending, particularly to developers, make it hard to see how the build target can be achieved.
One area of Labour’s housing policy which was particularly concerning to investors in the lead up to the election was their planned reforms to the rental market.
These include increasing abolishing “no-cause’ tenancy terminations, limiting rental increases to once a year, and requiring rental properties to be warm, dry and healthy in line with the party’s Healthy Homes Bill.
NZ Property Investors Federation executive officer Andrew King said if Labour goes through will these proposals, along with its ring-fencing of rental losses, it will make it harder for people to provide rental properties and some won’t be able to any more.
“That will lead to more of a shortage of rental properties over the medium to long term, rather than an increase in rental properties which is what is needed. It won’t happen overnight, but it will happen.”
But he said the NZPIF was looking forward to working with the Labour-led government to minimise the negative impact of these policies on landlords while offering better protection to tenants.
“We are interested in improving security of tenure, for example. Many of our members would be very happy to have longer tenancies so we want to work to achieve that.
“We will still also be pushing forward our opinion that rental property providers need to be supported, not denigrated as they have been over the last few years.”
Speaking at the TMM Better Business conference yesterday, CoreLogic head of research Nick Goodall, many of the housing policies announced by parties across the spectrum are really tweaks to the market.
“I don’t think there is anything there that would make lots of investors want to dump all their stock in a big way.”
Labour’s Healthy Homes Bill, which has already passed its second reading in Parliament, might increase the costs to investors, he said.
“Most investors are not likely to sell up because of it but they might not see the same value in buying new properties if they have to pay to get them up to standard. That could eventually have some impact on the market.”
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