Monthly Property Insights

Over the past few years, first home buyers have been a strong presence in the market, taking advantage of lower house prices and falling interest rates, as well as tapping into KiwiSaver for at least part of the deposit and also taking full advantage of the low deposit lending allowances at the banks.

But the main change in buyer patterns in the more recent 6-12 months has come from mortgaged multiple property owners – MPOs, including ‘Mum and Dad’ investors – who have returned to around their normal market share (circa 25% of purchases) after a previous lull. Lower mortgage rates have clearly helped them too, as well as the full reinstatement of interest deductibility.

Keeping an eye on loan to value ratio limits …

In the most recent month or so, however, more issues have come onto the table for property investors to be mindful of, both relating to potential rule changes. First, the Reserve Bank came out with a ‘surprise’ announcement that they’ll be loosening the LVRs from 1st December – not the deposit requirements themselves, but an increase in the high LVR speed limit for both owner-occupiers (to 25%) and investors (to 10%).

There’s little to suggest that the current, lower speed limit is really preventing any owner-occupiers (first home buyers in particular) from getting finance with a low deposit, so the relaxation of the rules may not mean much for this group – albeit some more pre-approvals might be possible. However, the 5% cap for investors at present does still look pretty binding, so a rise to 10% will be a boost for some ‘Mums and Dads’, bolstering the upwards trend that’s already evident for this buyer group.

… as well as the Labour Party

Then we got the proposal from Labour to introduce a 28% capital gains tax for property investors from the 1st July 2027. Now, let’s not get carried away – Labour would have to get into power first, and CGT can of course be dodged (for a while) by simply not selling. Overseas, CGT doesn’t stop price growth either; in fact, without rising house prices, no tax would be collected.

That being said, this does seem to be another small step along a (inevitable?) path towards property investment returns being lower in future than they have been in the past. This could mean fewer investors owning property than otherwise would have been the case and/or a shift in the focus for their strategies. Indeed, if capital gains (either before or after tax) are lower in future, it might mean a renewed focus on income/yields and buying properties that deliver more on that front.

The broader picture at present

But putting aside these regulatory factors, how does the wider market look right now? The Cotality Home Value Index has shown two small increases in median values in September and October – still too early to be sure that an upturn is here, but of course they do have to start somewhere. And when you consider shifting fundamentals, such as lower mortgage rates, a drop in the stock of listings, and green shoots in the economy, the case for anticipating higher house prices in 2026 becomes clearer.

To be fair, any physical ‘shortages’ of housing that we had 4-5 years ago have lessened – especially in a key market such as Auckland – and DTIs loom pretty large in 2026 too. As such, a modest rise in property values of perhaps around 5% looks much more likely than a fresh boom. Some might be disappointed with that outlook, but a period of flatter house prices may be just what NZ needs.