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For the government of Prime Minister Jacinda Ardern, record low housing affordability is a key issue.
New Zealand is introducing rules aimed at reducing the speculative appeal of real estate and improving the record low housing affordability. This is an important issue for the government of Prime Minister Jacinda Ardern as she aims to make the country hot The real estate market is cooling down.
The draft new law restricts real estate investors from deducting mortgage interest from taxable income and will take effect on October 1. The measure was first announced in March and is part of a series of real estate measures launched by South Pacific countries of 5 million.
Treasury Secretary Grant Robertson said in a statement: “Taxation is neither the cause of the housing problem nor the solution to the housing problem, but it does have an impact. It is part of the government’s overall response.”
Multi-billion-dollar government stimulus measures, historically low interest rates, and New Zealand’s relative success in COVID-19 have all pushed up housing prices, as returning New Zealanders and investors invested money in real estate, pushing up housing prices far ahead of Wages increase.
Housing prices rose nearly 26% year-on-year in August, making it the least affordable country in the Organization for Economic Cooperation and Development (OECD).
The country’s Human Rights Commission stated in its August investigation into the housing crisis that it had a “punitive impact” on marginalized communities.
The government hit investors with new taxes in March, and the authorities promised to provide more support to first-time home buyers by increasing the supply of affordable housing.
Robertson said that early signs indicate that these measures have helped reduce the enthusiasm of investors to buy existing homes, thereby providing a level playing field for first-time home buyers.
The new rules will limit the tax deduction for interest expenses incurred by residential investors on properties purchased on or after March 27 this year.
The interest deduction for existing residential properties purchased before this date will be phased out from October 1, 2025 to March 31.
These rules do not affect major family homes or new buildings.
The strong real estate market has made any changes to politically sensitive housing policies, which poses a challenge for Ardern, whose popularity has risen after successfully controlling the spread of COVID-19 in the country.
The opposition National Party slammed the policy, saying that it would not curb prices, but would accelerate rents and worsen the crisis.
National Party shadow finance minister Andrew Bayly (Andrew Bayly) said in a statement: “This is another ill-considered and hasty policy. Tax experts have almost no real input.” Each landlord will pay this additional tax.”
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