29 Sep 2021

New tenancy scheme likely to deter first home buyers - advocate

6:42 am on 29 September 2021

An advocate for first home buyers says scrapping interest deductibility for landlords might alleviate some competition in the market, but it's by no means a good news story.

House sold sign, house auction sign, key.

An advocate for first home buyers says new government policies will only make it harder to get into the property market. Photo: RNZ / 123rf

The government has clarified it will go ahead with the scheme which comes into effect on Friday, phasing out the provision for private investment properties over four years.

It had also clarified new builds would be exempt 20 years from the date their code of compliance was issued.

First Home Buyers Club spokesperson Lesley Harris said the change might result in less competition for existing stock, but it could also incentivise landlords to up their rents.

"Investors are going to invest, there's enough to gain in terms of capital gain, so I don't necessarily think it's going to stop investors.

"There will just be a shortfall of what can be claimed back in tax and my fear is that shortfall will just be passed over to the renter, which in other words is the potential first home buyer."

She said unless policy targeted the deposit required for a mortgage or help with lending, it did not directly address the challenges first home buyers faced.

"It just really concerns me that this is being touted as something that's going to help first home buyers. But how does this help people get lending? And how does this help people get deposits? And the answer's no, and no.

"They are the two big obstacles and anything else is just fluffing around the edges."

"I just get very cynical... I was quite vocal back in March [about] what was this actually going to do to help first time buyers? because that's how it was touted and in fact, what have we seen since March? The property market's just continued to skyrocket."

Harris said the recent changes to loan-to-value ratio restrictions put in place by the Reserve Bank would hit first home buyers harder than what this policy would benefit them by.

"Those sort of those little policies just kind of go under the radar, but that's going to be 160,000-odd first home buyers a year who will no longer be able to become a first home buyer."

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