New Zealand’s absent ‘middle’ market

Joshua, 37, works in medicine and lives in a cupboard in his own four-bedroom house in Island Bay, Wellington. He bought the place for $1.2 million in September 2021, near the market’s peak, and now rents out every bedroom to keep the mortgage serviced. Payments that started at $3,000 a month climbed to $3,800 as rates rose, and selling would mean crystallising a loss he can’t yet afford to take.

He’s not alone, according to Stuff. Rather, he’s an extreme version of the buyer group that has all but vanished from New Zealand’s property market this year: people trying to move house.

Three-way split

Cotality’s June housing report tells the story. First-home buyers made 10,025 purchases over the first five months of 2026, up 2.4% on the same period last year. Meanwhile, buyers moving between homes fell 11.1%, and investors with a mortgage on more than one property fell 5.7%, in a market where overall sales were down 8.3% in May alone.

First-home buyers now account for around 28% of all sales nationally, well above the 22% norm. Investor sentiment has moved the other way: mortgage advisers report a net 23% to 29% reduction in investor enquiries this year, and a University of Auckland survey of 200 landlords found 38% now planning to sell, compared with just 12% planning to buy.

Why movers have evaporated

The collapse in ‘movers’ has a specific cause. Anyone who bought near the November 2021 peak with a loan-to-value ratio above 80% is likely sitting on negative equity, with national values still around 17% below that peak.

For example, if you paid $1 million in mid-2021 with a $900,000 loan, and the property’s value dropped by 8–15%, your equity is gone. Banks won’t force a sale over falling paper value alone, but they also won’t refinance a top-up for the next purchase. The borrower is stuck until either prices recover or enough of the loan is paid down.

This is why the mover segment, historically close to a third of all transactions, has shrunk so dramatically. Trading up or down means selling and buying at the same time, and a household with no spare equity can’t do either side of that trade.

First-home buyers face no such constraint, as there’s no existing property holding them back, and investors who bought earlier or with lower leverage are still mobile. The people stuck in the middle are stuck precisely because they’re in the middle.

Why investors have stepped back

The investor retreat has different roots. ANZ cut its 2026 house price inflation forecast from 5% to 2%. This matters because the leveraged rental model was never really a yield play, it depended on capital gains covering the gap between rent and mortgage costs. With that gap no longer closing, the model doesn’t work for a lot of the investors who came in after 2015.

Rising rates and insurance costs, harder tenant management, and general economic uncertainty are other reasons cited in the landlord survey mentioned above. But the retreat isn’t uniform, with mortgage advisers reporting a split within the investor cohort itself: those still active tend to have real equity and a long-term hold plan, while the ones leaving were closer to speculating on resale. It’s a thinning of the market, not an evacuation of it.

Where first-home buyers are winning

Cotality’s regional breakdown, published on 8 May 2026, for the first quarter shows first-home buyers well above their historical norms almost everywhere, and furthest ahead in the smaller centres where affordability has shifted most.

Region	FHB share, Q1 2026	Vs long-term average
Wellington	37%	Highest in the country, ~8pts above average
Hamilton	33%	Well above average
Napier	31%	11pts above average — standout
Auckland	30%	Above average
Gisborne / Palmerston North	>30%	Above average
Tauranga	23%	Strong relative to own average of 17%

What this means for investors

First, the competition has thinned: with a third of landlords looking to sell and few looking to buy, equity-rich buyers face less bidding pressure than at any point since before the pandemic.

Second, the numbers need to work without assuming capital gains. ANZ’s downgraded forecast should be the base case for any purchase.

Third, watch the mover cohort as a leading indicator rather than a footnote: when enough of that group can finally transact again, either through price recovery or paid-down debt, it will show up as a second wave of demand rather than the current first-home-buyer-dominated market.

A market repricing who gets to move

The current market reflects balance-sheet realities: first-home buyers can act because they have no existing asset to sell, while equity-rich investors can act because they don’t need to sell one. Everyone else is waiting on the numbers.

Back to the Stuff story – Joshua isn’t planning on leaving his cupboard soon. Until people like him can do the sums differently, New Zealand’s property market will keep behaving like two active markets with an absent middle.

Thinking about where your portfolio sits in this split market? Talk to the Goodwins team on 0800 GOODWINS.