NZ will have a pretty flat housing market over the long-term - and it’ll be good for us

Sunday, 1 February 2026

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Sam Stubbs is the managing director of KiwiSaver fund Simplicity and a regular commentator on financial and economic issues.

OPINION: In spite of managing a KiwiSaver scheme, I don’t predict the direction of financial markets. Why? Because it is a fool’s game. Financial markets are too complex, with too many moving parts.

For example, it used to be that the sorts of things Donald Trump says on an almost daily basis would cause a crisis of confidence in the financial markets. But, it seems, quite the opposite. Markets seem to believe he will do whatever is required to keep them up. Who would have predicted that?

And history consistently shows that when it comes to investment returns, time in the market matters a lot more than timing of the market.

But the New Zealand property market is a much simpler beast, and it’s long term direction can be predicted with more certainty.

The last time I had a strong view was during Covid, where the signs of property prices about to rise strongly were everywhere - cheap money, pent up desire, with few new houses built while we all stayed at home.

And right now I feel pretty strongly that we are looking towards a property market that will go - well - nowhere.

Why? There are some structural changes happening in New Zealand that add up to a flat residential property market.

The first is that politicians fundamentally want more houses built, because 50% of adults now rent in NZ. So, keeping property prices under control, and rents affordable, will be a vote winner. KiwiBuild was our first failed attempt to get lots more homes built, but it won’t be our last.

To help make this happen, building regulations have been changed, which will erode the monopolies, duopolies and oligopolies that have defined our building environment. Builders will no longer be subject to the regular price rises you could set your watch by.

The second is that we will - almost certainly - have to tax capital gains in the future. Why? Because our current taxes will not pay for public services we want.

50 years ago, there were 8 taxpayers for every retiree. Now there are four. And, in 50 years time, we will have only two taxpayers per retiree.

That means, by 2070, all our income taxes will only pay for National Super and Health, leaving nothing for education, the environment, police, defence, Pharmac and all the other things we want. So, like it or not, we will have to tax wealth or capital gains in some form. The alternative - raising income taxes and GST to pay for everything - is not going to be a vote winner.

New Zealand is already an international outlier - and becoming a pariah - by not legislating tax on capital gains. My prediction is this will almost certainly change, because the realities of funding our social services will demand it.

The third reason house prices won’t go anywhere is - surprisingly - KiwiSaver.

In my parents day, as soon as the mortgage became affordable, or was paid off, you bought an investment property or a bach. Consequently, many billions of dollars ended up invested in unproductive investment properties, instead of the real economy. And while the tax free capital gains made many families richer, those who couldn’t afford to buy investment properties missed out.

But things are changing. Via KiwiSaver, millions of New Zealanders are now investing in the real economy, meaning more, better paid jobs, with more taxes to pay for our schools and hospitals. For our long term prosperity, this is a very good thing. But - for the property market - increasing KiwiSaver savings means less money available for mortgages on investment properties.

And KiwiSaver will further calm the property market, because institutional investment into building, owning and operating long term rental homes will increase supply. This has happened overseas, and is starting to happen here.

For example, in the last five years, one KiwiSaver plan has invested over $400 million into building homes for long-term rent. And when an option becomes available to reliably rent for the long-term, it lowers demand to buy. Retirement villages need more competition too, in the form of quality long-term rentals.

The fourth reason - our changing demography - is perhaps the biggest of all.

The New Zealand dream has been a stand alone home, and it is still the case for many. But as we live longer, with families becoming smaller, and more people living alone, the demand for apartments and town houses will rise. And they are inherently cheaper to build, which should increase supply and help keep a lid on house prices.

Note that I have not mentioned immigration, or interest rates, as factors in house prices going forward. These are usually the first things considered when predicting property prices. And, in the short term, they always influence market sentiment.

But, in spite of the current diaspora to Australia, I think New Zealand will be a net importer of people over time. We are simply too attractive a country not to. This will be good for the economy, and for property demand. But is unlikely to overwhelm the structural forces that will keep property prices under control.

And interest rates are like all financial markets - impossible to accurately predict. Betting on them to support the market long term is a fool’s game too. Covid-level interest rates were very much the exception, not the norm.

For all the reasons above, I think we are entering a pretty flat property market over the long term. And, as boring as it sounds, it will actually be very good for our future prosperity.

Correction: The words Kainga Ora have been replaced by KiwiBuild in the 8th par.