Navigating Change: The Latest Government Policies and the New Zealand Property Market.

east realty housing outlook

During the past two years, the New Zealand property market has experienced a slowdown due to rising interest rates, stricter lending rules, and a general reduction in economic confidence in New Zealand.

In the lead-up to the 2023 election, both the National and Act parties proposed policy reforms around tax and housing, such as reducing the Brightline test, changes to interest deductibility for rental properties, and alterations to the 90-day notice period for tenants. With the National-led coalition government now in power, these pledged reforms are being translated into actionable policies for the coming years.

In this blog, we focus on some of these recent policy changes related to the housing market.

The Brightline test

According to the Income Tax Act 2007, if you purchase property in New Zealand with the intent to sell, you are liable to pay tax on any profit made from its sale (referred to as “the intention test”). In 2015, the National government, under John Key, introduced the brightline test to complement the intention test. This meant that if you sold a property within two years of acquisition, you had to pay tax on the capital gain. In 2018, the Labour Party extended this brightline period to five years, and in 2021, it was further extended to 10 years, with an exception for new builds. This tax obligation doesn’t apply if you inherited the property or if it has always been your primary residence.

In December 2023, Finance Minister Nicola Willis officially declared a reduction of the brightline test to two years, effective from 1 July 2024. This change means that properties sold after 1 July 2024 will only be subject to the rule if owned for less than two years, removing the effective capital gains tax. The brightline period will apply retrospectively, So even if you bought your property when the brightline rule was 10 years, it will now be 2 years.

This adjustment could potentially spur increased activity in the property market, prompting earlier investor purchases and it could also drive potential selling. However, the full impact this change will have on property prices will require further analysis over time.

Interest Deductibility to return for rental properties

The restoration of interest deductibility is the focus of another recent policy reform. The National-led coalition party has adopted Act’s policy, aiming to expedite the return of interest deductibility for rental properties to investors. Under this plan, investors can gradually claim an increased portion of home loan interest:

  • 2023/24 Financial year: 60% of home loan interest costs.
  • 2024/25 Financial year: 80% of home loan interest costs.
  • 2025/26 Financial year: 100% of home loan interest costs.

While this policy may attract investors back to the housing market and reduce tax bills for current investors, it’s essential to consider the broader economic landscape, especially with high mortgage rates showing no signs of settling in 2024.

east realty new zealand property market

90-Day Notice Period Changes

Another policy change from the new government sees landlords regaining the flexibility to end a tenancy, with 90-day no-cause tenancy termination notices being reinstated. Labour’s removal of no-cause tenancy terminations had, according to National, discouraged landlords from offering their properties up for rent, therefore decreasing supply and putting upward pressure on rents.

This change to the tenancy laws is intended to provide landlords with a greater advantage and could potentially influence landlords to be more inclined to take more chances on tenants, creating a shift in the rental landscape.


The recent changes in policies regarding interest deductibility, the brightline test, and tenancy regulations provide insight into the transforming property market landscape under the new coalition government. Navigating the dynamic landscape of the New Zealand housing market requires thorough consideration and analysis. You should always consult an expert on these matters to see how your particular case will be affected.

For professional advice and insights tailored to your unique situation, contact the team at East Realty.

Compare listings


Subscribe To Our Mailing List

Please enable JavaScript in your browser to complete this form.