Has The Government’s Housing Policy Changes Made A Difference?

This year's Budget had little of substance concerning the property market. However, given the significant housing policy changes announced in March, it’s probably not surprising.  

It seems the government believes that the bright-line test changes, housing infrastructure boost and  ending the investor interest deductibility loophole will be a sufficient response to the housing crisis. 

While it may be early days to fully assess the impact these changes have had, there are indications the market is slowing. 

Indeed, that seems to be the view of the Treasury. Finance Minister Grant Robertson announced in the Budget that he expects house price growth to be just 0.9% between 2021 and 2022. And the Treasury says house prices will be roughly 16% lower than they would have been in 2025 if the government had not intervened. 

So, what are the early indicators of the effect of the March housing policy changes? 

First home buyers

One of the government’s aims was to make the property market more accessible to first home buyers. 

However, research from CoreLogic suggests that first home buyers may be taking a step back. Nationally, the market share for first home buyers in quarter one was 21.5% compared to 24.8% six months ago. 

Economist and commentator Tony Alexander has suggested this could be down to first home buyers’ fear of over-paying as housing supply issues continue to put upward pressure on house prices. According to the latest data from REINZ, record median house prices are still being set across the country. Nationwide, April’s median house prices increased by over 19% year on year. 

And this is against a backdrop of a 19.6% year-on-year decrease in the total number of properties available for sale. 


Property investors were another target in the government’s March policy announcement. The changes to the bright-line test, interest deductibility restrictions and tighter LVRs were introduced to put a brake on property investors. 

However, mortgaged property investors still had a strong showing in March, as data from the CoreLogic buyer classification survey shows. Nationwide, they accounted for 29% of property purchases in March despite the new LVR rules. 

It will take a while for the data to catch up with the policy changes. However, there is plenty of anecdotal evidence from real estate agents that investors are also adopting a more cautious approach. The Reserve Bank’s data in property lending will confirm the actual impact on investors over the next couple of months. 

Watch this space

As we head into the colder winter months, we can expect to see a natural stabilisation in house prices. And the second wave of LVR changes coming into effect from 1 May will also undoubtedly have an impact. 

Just as first home buyers and property investors appear to be adopting a wait and see approach, so we will have to watch this space over the coming months. As always, the Loan Market team will keep you updated on the latest trends.