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Housing policy package: Bright-line test extended, interest deductibility loophole closed, caps on first home products lifted, more money set aside for supporting development

By Jenée Tibshraeny


The Government has released a package of housing policies aimed at increasing the supply of houses and curbing demand by investors.

Here is a summary of the changes:

Bright-line test extended from five to 10 years

People who buy and sell a property within 10 years will need to pay income tax on any profit made.

The test for new build investment properties will remain at five years.

The family home and inherited property continue to be exempt from the bright-line test.

The new rule will apply to property acquired on or after March 27.

See this sheet for more.

Interest deductibility loophole removed

Property investors will no longer be able to offset their interest expenses against their rental income when calculating their tax.

The Government will consult on the detail of the proposal Cabinet has agreed to, and legislation will be introduced thereafter.

Consultation will look at an exemption for new builds acquired as a residential investment property, and consider whether all people who are taxed on the sale of a property (for example under the bright-line test) should be able to deduct their interest expense at the time of the sale.

The legislation will apply from October 1. However, interest deductions on residential investment property acquired on or after March 27 will not be allowed from October 1.

See this sheet for more.

Price and income caps on First Home products lifted

More first-home buyers will be eligible for the existing First Home Grant and First Home Loan.

The Grant provides eligible first-home buyers with up to $5,000 for individuals and up to $10,000 for two or more buyers to put towards the purchase of an existing home.

Buyers of a brand new home can receive up to $10,000 for individuals and up to $20,000 for two or more buyers.

Under the First Home Loan, a buyer only needs a 5% deposit. First Home Loans are issued by selected banks, building societies, and credit unions, and underwritten by Kāinga Ora - Homes and Communities.

The maximum income people can earn to receive this assistance will be lifted from $85,000 to $95,000 for single buyers, and from $130,000 to $150,000 for two or more buyers.

Price caps on homes that can be purchased using the assistance will be lifted as follows:


The changes will take effect on April 1.

See this sheet for more.

RBNZ restrictions of bank lending still being worked through

The Reserve Bank will report back to the Government on the possible introduction of debt-to-income ratio restrictions and restrictions on interest-only mortgages in May.

$3.8 billion Housing Acceleration Fund

The Government will set aside $3.8 billion to help fund infrastructure around housing developments, including roads and pipes to homes.

The key components of the fund include:

  • An infrastructure fund to unlock a mix of private sector led and government led developments in locations facing the biggest housing supply and affordability challenges, and
  • additional funding for the Land for Housing Programme to accelerate development of vacant or underutilised Crown owned land, operate in more regions, and deliver a broader range of affordable housing options for rental and home ownership.

Cabinet will consider the detailed criteria of the fund in June. The Government expects money to start going out the door in the second half of the year.

The Government will also help Kāinga Ora to borrow an additional $2 billion to “assist in bringing a range of development forward through strategic land purchases”.

See this sheet for more.

This story was originally published on and has been republished here with permission.