While Australian regulators and the corporate watch-chihuahua Australian Securities and Investments Commission make noises about the Sydney property market — described as a “bubble” today by ASIC head Greg Medcraft — the New Zealand government and financial regulators are attacking an Auckland property bubble that threatens to destabilise that country’s economy and financial system.

Last week the Reserve Bank of NZ (RBNZ) announced more stringent controls on loans to investors in Auckland property (30% deposit now needed) and outside of Auckland (15% now needed) and ordered the country’s banks (dominated by Australia’s big four) to separate all investors property loans into a new class of asset and to hold more capital against those loans, thereby increasing their cost of the lending banks.

And yesterday, the NZ government revealed a significant tightening of tax rules on residential property aimed at acting in concert with the RBNZ changes. These changes were announced ahead of the delivery of the country’s 2015-16 budget later this week.

From October 1 (when the new deposit rules for investor loans will also start), gains on residential property sold within two years of purchase will be taxed unless it is the seller’s main home, inherited from a deceased estate or transferred as part of a relationship property settlement, Finance Minister Bill English said on Sunday in a statement announcing the move. This is “expected to take some of the heat out of Auckland’s housing market and sit alongside the Reserve Bank’s latest moves to address associated financial stability issues,” English said.

This is a pretty forceful crackdown. English said in his statement:

“All non-residents and New Zealanders buying and selling any property other than their main home must provide a New Zealand IRD number [the Kiwi equivalent of our tax file numbers] as part of the usual land transfer process with Land Information New Zealand. In addition, all non-resident buyers and sellers must provide their tax identification number from their home country, along with current identification requirements such as a passport. And to ensure that our full anti-money laundering rules apply to non-residents before they buy a property, non-residents must have a New Zealand bank account before they can get a New Zealand IRD number.”

House prices in Auckland were up nearly 17% in the year to March, against an average rise of 3.2% elsewhere, an even faster rise than property prices in Sydney (up 14.6% in the year to April, including 15.5% for houses, compared with an 8.1% average increase for the five capital cities. The RBNZ first introduced these controls in October 2013 by imposing rules on so-called high value loans, usually made to investors and first home buyers with small deposits.

Now the market is waiting for the Australian Prudential Regulatory Authority to do something here based on its examination of the lending books of all lenders in the March quarter. Unlike the Kiwis, it’s likely APRA won’t say a thing and will work behind closed doors to change rules in home lending.

English said yesterday a new “bright line” test (that is, hard and fast objective test) would be introduced for non-residents and New Zealanders buying residential property, to supplement the Inland Revenue’s current, more nebulous “intentions” test (which tries to sort out whether people were buying the house for investment or to live in). And to toughen the rules on foreigners, English said the NZ government would investigate introducing a withholding tax for non-residents selling residential property from mid-2016.

NZ Prime Minister John Key was out today trying to sell the idea, denying there was a property crisis in Auckland. He said on NZ TV that the government had made these decisions in April, but analysts have pointed out that as late as April 13 Key was still telling media that he didn’t think a capital gains tax was the answer. So he has been a late convert.

In Australia, the government and its regulators appear scared to do anything — especially to try to control investor home deals, which are driven by negative gearing. The simplest way to haul back on activity would have been to get rid of the discounted capital gains tax on investment property — a big distortion if ever there were one. This government forwent that chance in last week’s budget and doesn’t gave the guts or sense to do anything and the key regulator, APRA, seems to think its on a par with ASIO in remaining silent on key operational issues in its bailiwick. Odd that Tony Abbott’s enthusiasm for citing NZ as an example of economic management doesn’t extend to dealing with a looming property bubble.