Ardern sceptical rent prices will soar after package to address 'broken' housing market

Source: 1News

The Government's recently announced changes to help cool the housing crisis have sparked concerns it'll cause rent prices to soar. But the Prime Minister is sceptical over whether that'll play out.

Speaking on Breakfast this morning, Jacinda Ardern said the Government already has plans in place to mitigate the issue of rental price increases.

Property investors, as well as the National and ACT parties, claim the changes to mortgage interest deductibility rules will drive rental prices up.

It means property investors can't offset their mortgage interest costs against their rental income when calculating tax. It will have a particular impact on investors with interest-only mortgages.

But that change is being trickled out over the next four years, rather than an immediate change, the Prime Minister pointed out.

"Now is a good time to do that because interest rates are low, we don't want the jarring effect on those existing investors, so we don't see people being suddenly turfed out of their houses," Ardern says.

"The other important thing to remember is that we've put in changes that said you get one rent increase a year, and so that's also to try and make sure that we don't see those big impacts on tenants as well."

The Healthy Homes legislation also led to threats of soaring rents, Ardern says.

"There we had similar things over the changes that we made to make rental properties healthy by requiring them to be insulated, warm and dry," she says.

"We didn't see that level that people claimed we would. I see a lot of speculation of what might happen in the rental market and we're going to keep a close eye there."

More changes intended to ease the housing crisis will be part of the upcoming Budget, Ardern says.

She admits the housing market is "absolutely broken".

"We don't want a situation where the only way you can buy a house is if you have parents who can help you with a deposit," she says.

"When you see in a 12-month period, when all the estimates are that potentially, because of Covid, the housing market could collapse and instead you see a 20 per cent increase since February, that is broken."

Last week, Infometrics senior economist Brad Olsen said rent prices were already rising even before the changes.

House prices rose 20 per cent in the last year; rent prices rose 3.2 per cent in the same period.