Budget 2018: What It Means For The Property Market

Grant Robertson delivered few surprises for the property market in his first budget.

The Finance Minister’s focus was on helping New Zealand’s struggling families and improving social services, with the lower end of the property market benefiting the most from his announcements.

Mr Robertson promised to increase public housing by more than 6000 homes over the next four years to address the shortage in state housing.

He announced the Government would spend $3.8 billion to build 6400 more state houses by 2022 and $170 million on emergency housing. The Energy and Efficiency and Conservation Authority is to get $142.5 million to help lower-income owner-occupied households insulate their homes, which will help improve lower-grade stock.

Prime Minister Jacinda Ardern underlined the Government’s commitment on housing in her speech after the Budget: “We need to address the single biggest cost that a family faces, a roof over its’ head. We need more houses” she said.

First-home buyers looking for extra help will no doubt feel disappointed but the Coalition will point to its previous announcements to show its commitment to addressing their concerns.

Indeed, the policies that will have a bigger impact on the property market, such as funding to address the housing shortage and help for first-home buyers, were announced in the December mini-Budget or have been steadily revealed by Housing Minister Phil Twyford over the past five months.

Nick Goodall, head of research at CoreLogic New Zealand, said that “many of the major announcements regarding the property market had already been detailed. Progress on KiwiBuild is underway, the Healthy Homes Guarantee Bill was passed and the extended bright-line test has come into force already.”

The Government is also working on a ban on foreign buyers for existing residential property.

Tax changes aimed at taking “heat” out of the market – such as ring-fencing losses for property investors and a capital gains tax – are currently being worked through by the Tax Working Group, and Mr Robertson’s language suggests he is receptive to these changes, saying that New Zealand couldn’t rely on an overheated property market for growth.

Capacity constraints in the construction sector will undoubtedly slowdown the pace of house building, but the Government has acknowledged this in recent announcements, such as its apprentice scheme.

Where Mr Robertson’s Budget announcements will have an impact on property markets is in the regions. More money for infrastructure, productivity and the regions will make previously neglected areas of New Zealand more attractive for business and home buyers.

Mr Goodall summed up the Budget from a property perspective by saying that “there was nothing in today’s release that alters our view on the outlook for the property market. We’re expecting subdued market activity to continue for at least the rest of the year, as supportive market fundamentals counteract the increasing difficulty for buyers to secure funding.”

REINZ chief executive Bindi Norwell welcomed Mr Robertson’s announcements on state housing, saying: “Home ownership is at its lowest level in 60 years and many Kiwis will never be able to achieve their dream of owning their own home. Today’s announcement will help some of the more vulnerable members of our society to have homes,” she said.

“We need to ensure these homes are available as soon as possible. The Government has promised 1,600 houses a year, so we look forward to them being able to deliver on this promise.”