End of the ‘accidental’ property millionaire: Why years of booming returns are behind us

Tuesday, 3 March 2026

Another property sells under the hammer at a Kiwi house auction. For years residential homes have given investors strong returns, but Martin Hawes is doubtful that will be the way into the future. (File photo)

Martin Hawes is a financial writer and presenter, and has written 25 personal finance books. He writes a weekly column.

OPINION: For a long time I have been negative on residential property as an investment. My primary reasons for being bearish have been the extremely high price of property and that housing has increasingly be come an issue of political debate.

For years my position as a bear was wrong – property continued to climb in most parts of the country giving investors and speculators good returns.

However, wrong as I was then, I remained confident that my assessment was right – that house price growth would not continue strongly upwards. In fact, I am now even more confident that residential property will not “enjoy” the big gains of the past.

A few years ago I proposed a bet with a friend that property investors and speculators will not see the returns in the next 50 years that they have seen for the last 50. Of course, the bet was a jest: neither I nor my friend on the other side of the potential wager would be here to settle up in 50 years. However, I did not propose that time period to avoid accountability; instead it was because I wanted a bet that would confirm that the returns over my adult lifetime have been an aberration, excessively high, and unlikely to be repeated.

I have three main reasons for this thinking: first, even though there has been a slump in the last few years, prices are still quite high. Whether measured by price to income or the net rentals yields that can be achieved, property in New Zealand is still expensive. A market that is already highly valued seldom gives good future returns.

Martin Hawes has long been negative towards residential real estate as an investment and current trends simply strengthen his scepticism.

To come back to any reasonable kind of value (one that might allow a decent future return) may take years. From these relatively high levels, it seems unlikely that there will be the major, sustained booms that I have seen in my lifetime.

Second, is politics: there is now a political consensus that housing is a basic need and that high property values are not good for our society. The two main parties at least seem to believe this, even though they may disagree on some of the means to get house prices down.

Increasingly houses are seen as a place to live, rather than something to speculate on. Although there is still disagreement about taxes between the political parties, many changes that have been legislated favour tenants and first home buyers – as consensus builds, some seem to be here to stay.

Third, New Zealand has plenty of land and the pressure is on to unlock more. We are also getting better at mass production of houses and when we start to put better construction efficiency together with more available land, we will have greater supply and lower prices. Good for first home aspirants; not so good for investors/speculators.

There are some other possible reasons that make property investment less attractive: the growth of KiwiSaver as an alternative route to a good retirement, the current slump proving that property markets can go down and stay down for extended periods, and the possibility of lower inward migration.

It seems to me that these things are major long-term secular changes and will mean property will cease to be the lazy or accidental pathway to wealth.

There will be investors who continue to do well but they will run their property investments professionally, like a business. They will look for areas of high rental growth, good access to transport/amenities, properties with the least maintenance and upgrades etc. They will look after their customers (aka tenants) and will prosper if they provide good, attractive houses where people want to live.

There will be pockets of property that will continue to do well (close to city centres or tourism areas). There may be some types of property that give good returns (maybe student accommodation). You may also want to try to hunt down bargains (but be aware that the property market has generally been efficient with few outrageous steals).

In our new world of property, a decent return on investment will take time, effort and energy – be prepared for that or look for something else to invest in.

In spite of a flatter market, some will make residential property a good investment– but they will have to work harder and smarter. At times over the last 50 years you could have bought just about anything with your eyes closed and done reasonably.

I expect property investment to go back to being what it was 50 years ago: higher cash yields but lower capital gains. Tell me if I am right in 50 years.

Martin Hawes is a financial writer and presenter. He is not a financial adviser and the information and opinions here should not be taken as financial advice.