With home ownership at an almost all-time low, a housing crisis and a property boom, housing was certainly a hot topic this election. Party leaders tread carefully around the topic - policies which promise to cause a drop in house values aren’t going to win many votes from home owners, but there’s also the challenge of getting the younger generation into the market, and general housing affordability issues.
So, what’s the impact of a new Labour government on the property market? We take a look at some of the key factors.
A level of uncertainty comes with a new government. Often market confidence can take a hit with change and uncertainty, but the panic is usually brief. After the shock Trump victory, the US dollar quickly sunk and stocks plummeted – similar to the Brexit vote which wiped trillions of dollars of value off global markets. Two quite extreme examples, but both of which have since recovered on the whole. Now that we at least have certainty of who will be running our country, buyers will have the confidence to make informed decisions.
Labour have been strong on reducing immigration – no surprises that NZ First are also on board. Labour estimates net migration will fall by 20 – 30,000 a year (in the year to June 2017, net migration was 72,305). Which would of course result in lower housing demand, and could put further strain on the construction skills shortage we already have. The proposed ‘KiwiBuild’ work visa plans to address this, to some degree.
Capital gains tax
Labour haven’t discounted the possibility of a capital gains tax, on secondary and rental properties.
Labour has made optimistic promises of building 100,000 affordable homes over 10 years (National had plans for double this figure). A tough task however, looking at the construction costs in Auckland (which have increased 6.8% in the year to September) and an industry which is already working at full capacity.
Labour and NZ First have agreed to restrict sales of residential land and farmland to NZ citizens, permanent residents who live in NZ and companies that are majority NZ-owned.
Labour propose to phase out investor ‘negative gearing’ to reduce income tax, designed to help first home buyers compete with investors currently using the loop-hole to their advantage
So what now? It’s not all doom and gloom, but it might be a good time to review your financial plans and mortgage structure – ensuring you’re well set up for the long term. Get in touch to arrange a review with an Apex mortgage specialist.