After nearly three years of cautious retreat, property investors across New Zealand are beginning to return to the market with renewed confidence. This significant shift from widespread hesitation to cautious optimism represents one of the most notable changes in the country’s property investment landscape since the post-COVID boom and subsequent downturn.
Between 2022 and 2024, property investors faced a perfect storm of challenges that dramatically reduced their market participation. As quoted on Radio NZ, Ed McKnight from Opes Partners explained that “when home loan rates were above 7 per cent, investors could have faced the prospect of having to pay $400 a week to service a loan, on top of the rent they received.”
The combination of soaring interest rates, policy changes, including the removal of interest deductibility, and an extended bright-line test created an environment where property investment became financially unviable for many. This was compounded by rapidly declining house prices that eroded investor confidence further.
CoreLogic data shows that investor market share dropped to as low as 20% during this period, well below the historical average of 25%. The caution was understandable – with rental yields at their lowest levels in years and significant negative cash flow requirements, property investment simply didn’t make financial sense for most investors.
Recent months have witnessed a remarkable transformation in investor sentiment, driven by several key factors working in tandem. The most significant catalyst has been the Reserve Bank’s monetary policy shift, with the Official Cash Rate (OCR) beginning its descent from peak levels.
As reported by Radio NZ’s coverage of CoreLogic data, “A combination of lower interest rates and cheaper house prices is tempting property investors back into the market.” The impact on cash flow has been dramatic – where investors previously faced weekly top-ups of $400 or more, this has now reduced to approximately $200 in many cases.
The return of interest deductibility has provided another crucial confidence boost. This policy reversal, being phased back in through to April 2025, allows investors to once again claim their borrowing costs against rental income, significantly improving the investment equation.
Property prices have also stabilised after their significant correction. The Real Estate Institute of New Zealand reports that whilst median house prices remain below peak levels, the rate of decline has slowed considerably, providing investors with more certainty about potential capital preservation.
The return has been “powered by mums and dads”, according to CoreLogic economist Kelvin Davidson, as quoted by Radio NZ, with single-property investors leading the charge. These smaller-scale investors, who often view property as part of their retirement planning, now represent 8% of market activity, up from just 6% in mid-2023.
Sarina Gibbon from the Auckland Property Investors Association told media that “investors were increasingly confident, because of a stronger-than-expected economic landscape, sustained rental demand and anticipated rate cuts.”
Interestingly, there’s been a shift in investor preferences, too. According to CoreLogic’s analysis reported by Radio NZ, “Investors were shifting away from new builds a bit, too, from 30 per cent of activity in the segment in 2023 to 27 per cent,” as the tax advantages of new builds have diminished with the return of interest deductibility for older properties.
The sentiment shift isn’t uniform across the country. While Auckland investors remain somewhat cautious due to more substantial price corrections in the region, other areas are showing stronger signs of recovery.
CoreLogic’s analysis shows that “Total listings in the year to November have risen significantly in key regions, with Wellington, Bay of Plenty, and Auckland seeing increases of more than 10% compared to last year.” However, this increased choice is actually benefiting investors by providing better negotiating power and selection.
Canterbury and other South Island markets have proven more resilient, with some regional centres experiencing renewed investor interest due to their relatively stable prices and improving rental yields.
Current data paints a picture of a gradual but steady recovery in investor confidence. CoreLogic’s buyer classification data shows that “investors increased their share of the activity to 23 per cent” in the first quarter of 2025, up from the low of 20% seen in 2024.
The Reserve Bank’s Credit Condition Survey noted “early signs of renewed interest from property investors, following lower lending rates,” with this being “the first time since 2021” that such increased residential mortgage lending to investors had been observed.
Rental yields have also improved significantly, reaching their highest levels since early 2016. CoreLogic data shows that “gross rental yields are at their highest level since early 2016, reaching 3.9% in November, from a floor of 2.8% in late 2021.”
Despite the improving sentiment, industry experts are counselling against unrealistic expectations. The days of explosive property price growth appear to be over, at least for the foreseeable future.
As noted in the New Zealand Herald’s year-in-review report, “Optimism over the Government’s investor-friendly policies even led some property pundits to last year predict house prices could jump by 10% in 2024” – predictions that proved overly optimistic.
Current forecasts are more measured, with banks predicting that “house prices will increase by 2.85% in the year to December 2025” according to Opes Partners’ analysis of bank forecasts. This represents a more sustainable level of growth that supports long-term investment viability without creating the speculative bubbles of the past.
For investors considering entering or re-entering the market, the fundamentals have indeed improved, but careful analysis remains essential. The current state of the New Zealand property market requires a thorough understanding before making investment decisions.
Interest rates, while falling, remain above the ultra-low levels that previously drove investor demand. This means cash flow analysis is more critical than ever. Most investment properties still require some level of negative gearing, though the amounts are becoming more manageable.
The 14 golden rules of property investment remain as relevant as ever, particularly around location selection, cash flow management, and long-term planning. Understanding the hidden challenges of real estate transactions is also crucial in today’s more complex market environment.
The emerging investor confidence appears to be built on more solid foundations than previous market cycles. Rather than being driven purely by speculation or fear of missing out, today’s returning investors are focused on fundamental metrics like rental yields, cash flow, and long-term capital preservation.
Kiwibank’s Jarrod Kerr, as quoted by Radio NZ, noted that “the hunted will become the hunters” as policy settings become more favourable for investors, but this transition is likely to be gradual rather than dramatic.
The Reserve Bank’s introduction of debt-to-income ratios will also help prevent the kind of excessive speculation that characterised previous booms. These measures are designed to ensure that any recovery remains sustainable and doesn’t create the affordability crises that have plagued New Zealand housing in the past.
For the broader market, a healthy level of investor participation is beneficial. Investors contribute to rental housing supply, provide market liquidity, and often improve properties through renovation and maintenance. The key is maintaining balance so that investment activity supports rather than undermines housing affordability for owner-occupiers.
The shift in property investment sentiment from caution to confidence represents a natural market cycle adjustment rather than a return to speculative excess. Today’s investors are more informed, face clearer regulatory frameworks, and are operating in an environment where sustainable returns matter more than quick capital gains.
This measured approach to renewed investor confidence suggests a healthier market dynamic ahead – one where patient capital and professional property management can contribute positively to New Zealand’s housing ecosystem while providing reasonable returns for investors willing to commit for the long term. The caution of recent years has given way not to reckless optimism, but to educated confidence based on improved fundamentals and clearer policy settings.
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