Is property investment in New Zealand still worth it?

If you’ve been anywhere near a property forum lately, you’ll have encountered the doom merchants. Interest rates are making investment unworkable, rents are falling, and a potential Labour government wants to tax your gains. The headlines suggest the golden era of NZ property investment is over. 

The reality, however, is more nuanced. Certainly, the numbers are tighter than they were in 2016 and, yes, the political landscape in an election year creates genuine uncertainty, but property investment in New Zealand is not finished. Investors who understand that shift are positioning themselves well, while others sit on the sidelines. 

Cashflow realities hit hard 

At current prices and interest rates, most residential investment properties run at a cashflow loss. A typical $800,000 rental property in a main centre, rented at around $800 per week, generates roughly $41,600 in annual rent. Once you subtract rates, insurance, maintenance, property management, compliance costs and a vacancy allowance you’re looking at around $20,000 in annual operating costs before the mortgage even enters the picture. 

Add a $400,000 mortgage at current rates and you’re topping up the property from your own pocket. That’s the reality for a significant proportion of landlords right now – and it has been since interest rates climbed sharply from their COVID lows. 

For what it’s worth, Cotality data shows gross rental yields have recovered from their 2021 nadir of 2.8% to around 3.9% by early 2025, and yields are still rising across most regions heading into 2026. But gross yield and liveable cashflow are two different animals – and confusing them has caught out many investors who ran the numbers on headlines rather than reality. 

The case that keeps getting made (and why it still has merit) 

Property bears often stop the analysis at cashflow and declare the investment broken. What they consistently underweight is the reason most NZ investors got into property in the first place: capital gain, amplified by leverage. 

New Zealand’s national median house price has risen from around $170,000 in 2000 to $786,977 by December 2025 – a fourfold increase over 25 years. The regional numbers are even more striking. CoreLogic found that Mackenzie District values rose over 1,000% since 2000, with Auckland up 370% and Christchurch up 348%. Against those numbers, the weekly top-ups many landlords have made look considerably less painful in hindsight. 

The key mechanism is leverage. When an investor puts in $400,000 of equity and borrows $400,000 to buy an $800,000 property that rises 5% in a year, the $40,000 gain represents a 10% return on their own capital, before rent contributes anything. REINZ data puts the 20-year average NZ property capital growth at 8.35% per annum, a figure that made patient investors wealthy even when monthly cashflow was negative. 

What’s changed and what hasn’t 

Some of the tailwinds that drove those historic returns are spent. Interest rates falling from 20% to near-zero over three decades supported ever-higher borrowing capacity. That cycle has run its course. Net migration (a major demand driver) fell to a net gain of just 10,681 in the year to November 2025, down 63% on the prior year, suppressing rental demand in the short term. 

But the fundamentals that have always underpinned NZ property haven’t evaporated: the country still isn’t building enough housing to meet long-run demand, and development is getting more expensive. Average developer contributions will rise from roughly $21,000–$30,000 to $30,000–$50,000 per household unit, with high-growth “Investment Priority Areas” like Tāmaki potentially seeing costs rise as high as $119,000. 

The election factor 

An election year inevitably sharpens political risk for property investors, and 2026 is no different. Labour has confirmed it would introduce a 28% capital gains tax on residential and commercial investment properties from 1 July 2027. Family homes and farms would be exempt. 

It’s worth being clear about what this policy is and, importantly, what it isn’t. This is not a proposal to remove interest deductibility again – Labour’s more damaging 2021 policy that the current government phased out entirely by April 2025. The CGT is a tax on realised gains when you sell; it doesn’t affect your annual cashflow or your ability to hold a property indefinitely. 

Importantly, the proposed CGT would only apply to gains accrued after 1 July 2027, so existing investors would not be taxed on gains already made. And as Deloitte tax partner Robyn Walker observed, “you do need to have made a gain… you have to have sold the property, you do actually have the cash in hand”. That’s a fundamentally different proposition to wealth taxes or deductibility removal. 

Cotality’s Davidson put it plainly: “the way to avoid paying capital gains tax is simply not to sell”. For buy-and-hold investors focused on long-term wealth creation, this is a material observation. Australia has had a CGT since 1985, and their house prices have continued to surge regardless. 

So, does property investment still work? 

Yes, but not by accident, and not the way it worked for the generation that bought in the 1990s and 2000s. The era of buying any house in any suburb, doing nothing with it, and watching leverage do all the heavy lifting is over. 

What does work, and what the investors currently succeeding are doing, is buying with discipline. That means running the real numbers (net yield, not gross), selecting locations where rental demand is structural rather than speculative, and understanding that the holding period matters more than ever. 

Provincial markets like Southland, parts of Canterbury and Northland are delivering gross yields around 5–5.3%, meaningfully above the national median and, for investors with reasonable equity, approaching cashflow neutral at current interest rates. Auckland’s yields have also recovered to levels comparable with Christchurch – something that’s historically rare, and the city’s constrained new supply pipeline supports the long-term price case. 

The investors who will look back on 2025 and 2026 as a missed opportunity are the ones who waited for certainty. Volumes are stabilising, the floor is in, and the recovery is beginning.  

Talk to the Goodwins team about what property investment looks like for your situation. Call us on 0800 GOODWINS.