Housing announcement: Landlords, commentators fume over Government changes

Cracking down on investors won't fix the housing market and instead worsen the country's rental crisis, the New Zealand Property Investors Federation says.

Speaking to Newshub on Tuesday, federation chief executive Sharon Cullwick argued a large number of investors may now exit the industry.

Her comments came after the Government announced on Tuesday it will expand the property investment tax from five years to 10.

"We think there will be a lot of landlords that will exit the market because of that, which means there will be fewer houses for people to rent," Cullwick said. 

"I'd say by two years there will be a higher rental crisis than what there is now, so there will be more people ending up going into emergency housing and they won't be able to build houses fast enough or those people."

Property commentator Ashley Church said the Government's package was "desperate".

"I think it's because they simply don't know what they're doing and this is a desperate attempt to be seen to do something, and that's partly by showing money at things at partly by a bit of virtue signalling.

"[It's] not going to make any difference to the problems they're trying to resolve."

Ashley Church.
Ashley Church. Photo credit: The AM Show

Finance Minister Grant Robertson on Tuesday announced the expansion of the property investment tax, also known as the bright-line test, would come into effect this weekend. Real Estate Institute of New Zealand acting chief executive Wendy Alexander said it won't be a magic bullet.

"In actual fact, what it's likely to lead to is residential property investors holding on to their properties for even longer in order to avoid paying tax, thereby further reducing the total pool of properties available in the market.

"However, the fact that new builds are to be exempt from the bright-line test is welcome news and could go some way to helping to boost the overall supply of housing."

Infometrics senior economist Brad Olsen agreed the bright-line extension won't fix the housing market by itself. 

"It does mean people are going to make a different decision when it comes to investing in property because if they are wanting to flick it quickly and get some of those capital gains, they're going to have to pay tax on it - just like you and I do for income when we go to work each day," Olsen told Magic Talk host Peter Williams.

National leader Judith Collins, meanwhile, believes the Government has broken a pre-election promise of no new taxes.

"This Government has taken the bright-line test, turned it into a full-scale capital gains tax," she said. "They've lied to New Zealanders."

But Prime Minister Jacinda Ardern is optimistic that the package, which also sees loopholes around interest deductibility scrapped, will give first-home buyers more opportunities.

Ardern told reporters on Tuesday the package would address supply and demand.

"Our view is that this will make a difference," she said. "We have taken an approach here, though, of using every lever we have.

"There is no silver bullet to the housing crisis."

Ardern said the market needs to change.

"The need for further action is clear. The last thing our economy and homeowners need, right now, is a dangerous housing bubble."

As part of the package, a $3.8 billion fund will be set aside to help green light tens of thousands of house builds.