Is NZ’s love affair with property headed for a break up?

Sunday, 2 November 2025

Auckland lawyer Shai Navot was raised under the ideology that investing in housing was “the” way to grow your wealth in New Zealand.

Now, seeing younger generations struggle to get on the ladder, the former Opportunities Party leader questions that.

During her stint in politics Navot - who says she now has no political affiliation - was one of those beating the drum that New Zealanders had to break up with their love affair with property. Her Masters thesis was on the housing crisis, “a topic near to my heart”.

“Our parents’ generation, and older, had the ability to make money from buying and selling houses to each other, by bidding up the price of housing that Millennials (and younger generations) have ultimately had to pay,” she tells the Star-Times.

“With both the tax and social incentives that have driven the focus on housing as the best source of investment, there is still such a focus on home ownership as the ‘best’ place to put your money.”

Will that remain true? This week, the Labour Party finally committed to taking a capital gains tax to next year’s election. It would see properties considered to be for investment purposes - the family home is exempt - be liable for a 28% tax on any profit.

For proponents of a fairer tax system and a capital gains tax in particular, the implementation could iron out the quirks of New Zealand’s economy - that our homes have at times earned more than we do, that values are largely driven by land supply rather than quality homes and new developments, and that Kiwis have built wealth by buying and selling homes with one another.

Independent economist Tony Alexander this week noted that there is a movement away from residential property investment, as it’s commonly accepted that the days of extraordinary gains are now behind us.

Is a capital gains tax on top of a flattened market a final nail in the coffin? Unlikely, investors, experts, and one young person with a passion for buying and selling told the Star-Times this week.

According to chief property economist Kelvin Davidson of Cotality NZ, Labour’s tax proposal is likely to be less of an issue for most investors than any possible reversal of mortgage interest deductibility, as that was a constant cost, unrelated to selling.

Any CGT would not take effect until mid-2027, making a rush of selling unlikely, Davidson predicts.

In fact, the Reserve Bank’s decision to ease loan-to-value ratio rules should further support investor activity, although upcoming debt-to-income restrictions could temper that.

“Investors are likely to be the first group affected by DTI caps,” Davidson says.

Investors spoken to in the wake of Labour’s policy this week were relatively low key on the tax, with some questioning why it shouldn’t apply to all gains, others highlighting the so-called gains were likely many years away, and at least one pointing out that serious investors were unlikely to be bothered if they’d structured their investments right.

Ultimately, if an investor bought well, and structured their investment properly, a capital gains tax should not be a problem, one was reported saying.

Property has been the source of a significant transfer of wealth from the young to older generations, as the young and those on lower incomes were priced out of the private market, into insecure accommodation.

OECD research in 2024 found over 50% of New Zealand’s lowest-income households (those in the lowest income quintile) spend more than 40% of their disposable income on housing costs.

In 2021, the Reserve Bank estimated the aggregate value of land and housing, including rental and owner-occupied properties, was around $1.5 trillion. That’s close to five times the size of annual GDP and more than seven times the value of all NZX-listed companies.

Independent economist Anthony Byett said housing was an issue for all countries “and I am unaware of a country that has overcome this issue.”

“We do know it causes significant inequities and there is research that shows GDP would likely be higher without such large house price increases.”

The Reserve Bank has previously noted that Kiwis’ investment in property has come at the expense of diversification in their assets, including retirement funds.

Navot points out if her generation was to make the kind of money from housing as its parents, the cycle of house price rises would have to continue.

“Do we really want to continue to saddle the younger generations with such high levels of debt in order to make ourselves richer?”

But owning a home is still aspirational for lots of young people, says 26-year-old Ruby Donnelly, who is perfectly placed to know — she’s both a real estate agent and a homeowner.

“First home buyers are still a key part of the market,” the Lower Hutt-born Donnelly says. “While many young people are increasing their KiwiSaver contributions or investing, ultimately the allure of not renting and owning your own home is still strong.”

Younger buyers are often looking to add value themselves rather than purchasing a move-in-ready property — “which is super cool to see.”

But Donnelly, who is with Ray White Kemeys in Petone, recognises the mountain many face just to get started. High prices, tighter lending rules and rising living costs have made saving a deposit harder than ever.

“Affordability is definitely a challenge, but I think there’s still a real drive to get ahead financially,” she says. “KiwiSaver helps make saving for that first deposit a bit more achievable - it’s almost like a compulsory head start.”

She accepts some may feel purchasing is out of reach and choose to rent.

Property runs in her family. Donnelly bought her first home at 23, ironically from the company she now works for.

“I’ve always admired my older brother, who bought his first property at 21 and has worked so hard to keep growing his portfolio.”

After starting in property management, real estate seemed a natural progression.

“It’s been even better than I imagined — it’s fast-paced, no day is the same, and I love helping buyers into their first homes or negotiating a tricky deal.”

Many of her friends still rent, she says, but even they see ownership as a long-term goal.

So what next?

While across the country, property values are about 17% below their peak, with some regions nudging up and others down, there are signs of renewed energy, Davidson says.

He points to lower interest rates, fewer listings, and a tentative return of investors as suggesting modest price growth as early as 2026.

Sales volumes have increased while the number of properties for sale has been falling.

“It’s still a buyer’s market. There’s more activity and trading, but prices overall have held steady.”

Lowering interest rates has been a boon for first-home buyers, buoyed by slightly improved affordability and more stock, especially in Wellington and Auckland.

But Davidson says the most notable shift was among investors, slowly re-emerging as lower rates improve cashflow and full interest deductibility is restored.

“That’s the key factor changing the equation,” he says.

While many landlords still need to top up rental income from other sources, the shortfall is much smaller than a year ago.

Conversely, affordability pressures, an earlier oversupply of listings, and a weak labour market has kept prices in check.

With borrowing costs easing mortgages will be around 5% by Christmas, so 2026 could bring modest price rises.

Davidson predicts rises of about 5%, rather than the explosive 20% surges of earlier cycles.

Navot, meanwhile, would like to see people investing in productive assets like businesses that create jobs and exports.

That would involve removing distortion in the tax system, by properly including property in the tax regime, and making investment easier for young people to access and navigate.

“Is that not the very type of investments politicians of all stripes should be encouraging?”

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