The Government has promised to soften the country’s de facto capital gains, known as the bright-line test.
From July 1, anyone who sells a property - which they don’t use as their main home - within two years of purchase will have to pay income tax on any gains received. Currently, most investors who sell properties within 10 years of purchase are taxed.
The Government has also promised to phase in interest deductibility, which was being phased out by the previous Government.
This will enable investors to once again deduct mortgage interest as an expense when paying tax. Debate is under way between National and Act around how quickly to make the change.
Coming back to the December figures, first-home buyers filled the gap left open by investors, accounting for $1.3 billion (25 per cent) of the $5.3b of new mortgages written during the month.
While this was the largest share for first-home buyers since at least 2014, they still borrowed more in 2020 and 2021.
As for the $5.3b total value of new mortgage lending for December, this was 3.6 per cent more than in December 2022, but 33.1 per cent less than in December 2021.
Those looking for signs of how the property market is thawing out will be heartened that December 2023 was the fifth month in a row in which the value of new mortgages written surpassed the same month the previous year.
Commentators expect the Reserve Bank’s proposal to ease loan-to-value ratio (LVR) restrictions and introduce debt-to-income (DTI) restrictions sometime from the middle of the year to have a small positive effect on the market.
The easing of LVR rules would mean most investors would need a deposit of at least 30 per cent to get a loan, rather than a deposit of at least 35 per cent.
When the restrictions were at this level just before Covid-19 came along, more than a quarter of new investor loans went to investors with deposits of between 30 and 35 per cent.
As for owner-occupiers, the proposed LVR rule change would lift the cap on the value of owner-occupier loans banks could issue borrowers with deposits of less than 20 per cent.
DTI restrictions are only expected to bite if interest rates fall by a lot and the housing market enters a boom phase.
Currently, high interest rates are doing more to hamper borrowers seeking a lot of debt compared to their incomes than DTI restrictions would.
Jenée Tibshraeny is the Herald’s Wellington business editor, based in the Parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.