Nerida Conisbee
Chief Economist
Ray White Group
New Zealand has the worst rental affordability in the world. Today’s budget announcement that interest costs would again be made tax deductible and the brightline test adjusted is therefore welcome news for rental supply and hence affordability.
An OECD study undertaken in 2020 found that New Zealand had the highest proportion of households under rental stress. A quarter of households that rent were spending more than 40 per cent of their disposable income on rent. Since then, rental growth has continued, up 14 per cent. A shortage of rental properties is to blame.
Approximately 85 per cent of rental properties in New Zealand are provided by private landlords, hence any reduction in this ownership has a negative impact on rental homes. A clearer idea about the number of rental properties in New Zealand will become available once the 2023 Census data is released on this later in the year. It is, however, likely that the removal of tax deductibility on interest payments for investors and an adjustment in the brightline test were factors in rising rental rates and ongoing low levels of affordability. The budget announcement that interest deductibility for landlords would be restored and the brightline test adjusted is therefore great news for renters as it will encourage more investors into the market.
Another key feature of the budget was the scrapping of first home buyer grants to fund more social housing. The first home buyer grants were particularly popular and it will be a blow for many looking into the market. More positively, generous first home buyer incentives have been linked to declining affordability and ideally this will calm long term price growth for more affordable homes. Ideally, the switch will address the long waiting lists currently in place for social housing.
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Media contacts:
Nerida Conisbee
Ray White Group
Chief Economist
nconisbee@raywhite.com
+61 439 395 102
Cassandra Glover
Media Advisor
Ray White Group
+61 447 000 472
cglover@raywhite.com