Goldman Sachs warn of a potential 20% drop in New Zealand house prices

House prices in New Zealand have rocketed higher, prompting the New Zealand government to address affordability issues, with measures that include: 

  • stopping residential property investors from offsetting home loan interest costs as an expense against their income from those properties (deductibility will be phased out over the next four years)
  • the duration that investors have to hold a property before they are exempted from capital gains tax after selling has also been extended from five years to 10

With that background, GS:

  • “While the changes are yet to be finalised – and the impacts are highly uncertain – we estimate they could pose about a 10-20 per cent headwind to New Zealand house prices and subtract about 0.5-1 percentage points from GDP over the medium term” 
  • “That said, this headwind is likely to be broadly offset by tailwinds from earlier monetary stimulus, with prices likely to remain broadly flat going forward in net terms.”

House prices in New Zealand have rocketed higher, prompting the New Zealand government to address affordability issues, with measures that include: 
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