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Is it a good time to invest in NZ property?
Weighing the pros and cons in a flat property market.
The New Zealand property market continues to be a puzzle. While headline figures suggest things are fairly flat, a closer look reveals a growing number of property investors are choosing to make their move. So, what’s really going on behind the scenes?
To get to the bottom of it, we leaned on the expertise of our partner, Kelvin Davidson, Chief Property Economist at Cotality. He helps us unpack the opposing factors that investors are currently weighing up.
A market of two halves
At first glance, the market appears stagnant. As Kelvin points out, the numbers don't exactly scream "buy." He notes that "national median values are only up by 0.6% over the first half of 2025."
He puts this into a longer-term perspective for us. After a significant drop from the peak in early 2022, "values have only edged up by a total of 2.6%," he explains. "The average capital gain in the past few years has been minimal."
Despite this, Cotality's Buyer Classification data shows a clear trend. "Mortgaged multiple property owners, including investors, have raised their share of purchases from 21% a year ago to 24% now," says Kelvin. While this is just shy of the long-term average, it's a significant uptick. So, what’s tempting them back into the market?
The pull factors: why investors are buying now
According to Kelvin, several recent changes have tipped the scales in favour of property investment. He points out that "the Brightline Test is back to two years, lending rules only require a 30% deposit rather than 40%... and of course full mortgage interest deductibility is back."
However, Kelvin believes the single most significant factor is the drop in borrowing costs. "In my view the most important change has simply been the fall in mortgage rates themselves," he states. This has a direct impact on an investor's weekly budget. He calculates that this has reduced "the cashflow top-up typically required on a rental property purchase from perhaps $400-$500 per week... last year to maybe $200 now – still hefty, but more comfortable for a larger number of households."
The push factors: the risks giving investors pause
It's not all smooth sailing, and savvy investors are proceeding with caution. On the other side of the ledger, Kelvin highlights several challenges.
He notes that rental growth has "faded to zero," a trend consistent with a high supply of available rentals and slowing demand as net migration eases. At the same time, "costs continue to go up, including council rates."
There's also the element of political uncertainty. Kelvin says that "some investors are also wary of the political risk... that a future Labour-led Government may well take interest deductibility away again."
Looking further ahead, he identifies longer-term concerns that might temper expectations. "I’d also highlight a longer-term factor... which is the possibility that capital gains in future are lower than in the past," he suggests. A combination of potential tax changes, a government push for more housing supply, and the fact that "the long-term downwards trend in interest rates can’t be repeated" could all reshape the investment landscape.
Finally, he adds a crucial new piece to the puzzle: the official Debt-to-Income (DTI) ratio rules. "These may well make it more difficult for investors to grow a portfolio at the same speed as before," Kelvin cautions, though he reminds us that new builds remain exempt.
The final word: it comes down to cash flow
Ultimately, the decision to invest is a personal one, and Kelvin is clear that there are always pros and cons to weigh up.
As he says, "The choice of whether property is a ‘good’ investment in this cycle is not for me to say."
However, the data speaks for itself. "Our data shows that some people have already made that choice and are starting to buy investment properties again," he confirms.
For those considering taking the plunge, Kelvin leaves us with a timeless piece of advice. "To me, a focus on cashflow always makes sense, because capital gains (of whatever magnitude) won’t be achieved if you can’t service the debt in the meantime." In a market of uncertainty, a solid financial strategy is more important than ever.
Author
Chief Property Economist, Cotality - cotality.com
Kelvin joined Cotality (previously CoreLogic) in March 2018 as Senior Research Analyst, before moving into his current role of Chief Economist. He brings with him a wealth of experience, having spent 15 years working largely in private sector economic consultancies in both New Zealand and the UK.
In his role with Cotality, Kelvin’s focus is on keeping up to date with what’s going on in the property market and continually finding different ways for viewing and interpreting it. Kelvin’s economics background means that he knows his way around a spreadsheet, but more importantly he always puts more emphasis on providing the key insights and telling a story, whether his audience be clients or the media.
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