New Zealand’s government is expected to announce steps to reign in the sharp spike in property prices across its country that is preventing young, low income buyers from making purchases. New Zealand has been one of the key economies that has posted a strong recovery from the effects of the coronavirus pandemic, increasing investor confidence in the economy and driving greater interest in its economy, especially the real estate sector.

As a result, house prices across New Zealand have risen by nearly 25% within a year, even as wages grow at a far slower pace in comparison, making housing a distant dream for low income workers. In addition to the increased investor interest, large sums of fiscal stimulus coupled with low interest rates have also driven higher levels of activity in the housing market.

Affordability of houses has fallen to the lowest levels seen in almost two decades, with New Zealand’s housing sector now being the least affordable among the 36 OECD nations around the world. The problem isn’t new, however – over the past 10 years, house prices across New Zealand have doubled and governments in the past have also struggled to contain this phenomenon.

In response, the government could look at ways to restrict loans to investors and making the real estate market less attractive as an investment avenue. Some methods being explored include curbing high debt-to-income and interest-only mortgage lending to investors, lowering tax rates on investments outside of the housing sector, and extending holding time of investment properties from five years to 10 in order to be eligible for tax offsets.