Investors are back

Since the government reinstated full interest deductibility and slashed the bright-line test to two years, investor mortgage applications have surged by 65.5%. Investors now represent 15.2% of all new mortgages, up from 12.8% in November 2023, according to RBNZ figures crunched by analysts at macrobusiness.com.au.

Why the Surge?

The government threw landlords a lifeline when they restored interest deductibility and cut the bright-line test to just two years. Add in falling interest rates and the numbers suddenly work.

One-year fixed mortgage rates have dropped about 1.5 percentage points over the past year, and two-year fixed rates are down roughly 2.4 percentage points compared to 2023. Borrowers with 20%+ equity can now lock in rates as low as 4.49% for terms up to two years.

“If you’re putting in a top-up to a rental property, that top-up might have been $400 or $500 last year – now it could be $200. That’s a lot less cash than it was.” — Corelogic’s Kelvin Davidson

House prices remain about 17% below their early 2022 peak, despite two consecutive months of modest growth. Entry prices are reasonable, yields are improving with lower debt servicing costs, and there’s room for modest capital growth as the market recovers.

The Reserve Bank’s decision to relax loan-to-value ratio restrictions in mid-2024 and again from 1 December 2025 is helping both first-home buyers and investors gain easier access to finance.

Mum and Dad Investors Dominate

Forget about property syndicates or foreign buyers. Smaller-scale, mum-and-dad investors are dominating the action — think everyday Kiwis who own their own home, have built up some equity, and are using it to buy one or two rental properties as a wealth-building strategy.

According to Corelogic data, the recent rise in mortgaged multiple property owner (MPO) activity has come “entirely from smaller players” – either new investors buying their first rental or existing investors with portfolios of up to three properties.

With interest deductibility restored and mortgage rates down, the cash flow equation adds up.

“With potential top-up costs falling, many appear to be using equity in their own home or across their existing portfolio of rental dwellings to step into the market,” says Davidson.

What Investors Are Buying

Investors paid a median of $759,000 nationally in 2025, down from $770,000 in 2024. First-home buyers paid $700,000 (up from $695,000), while relocating owner-occupiers paid $880,000 (up from $870,000).

Investors aren’t suddenly hunting bargain-basement units to chase yield. Their share of standalone house purchases has crept up from 66% in 2024 to 67% in 2025. Compare that to first-home buyers and movers, where standalone dwellings account for 75% of activity for both groups, according to Cotality’s property market trends.

Critics love to blame investors for pricing out first-home buyers, but the current data doesn’t support it. Investors are paying slightly less than last year, first-home buyers are at record participation levels (27.7% of Q3 purchases), and both groups are operating comfortably in their respective price brackets.

There’s room for everyone right now. High inventory — 30,721 properties for sale in September, an 11-year high — means buyers of all types have options.

Tony Alexander’s Warning

Independent economist Tony Alexander has a message for anyone expecting a return to the wild days of the post-pandemic property boom: forget about it.

In his latest commentary, Alexander notes that while FOMO (fear of missing out) is creeping back into the market — with 20% of real estate agents reporting it in October — it’s nowhere near the 90%+ levels seen in late 2020.

“The old days of a housing cycle upturn that inevitably produces an investor-driven splurge have gone. RIP.”

Several structural factors have changed:

• Supply is higher. Efforts to free up land, allow intensification, and speed up consents have lifted the average level of house construction in NZ. More supply means less upward price pressure.
• Investor tax advantages are gone. No more ring-fencing losses. No more depreciation on buildings. The tax-driven investment model is dead.
• Rental yield expectations are more realistic. Investors can’t just bank on capital gains anymore. The numbers need to work on a yield basis from day one.
• Population growth is slower. Net migration flows are weak, meaning less rental demand growth than in previous cycles.
• Debt-to-income ratios are in effect. The RBNZ’s DTI caps, which kicked in earlier this year, limit how much investors can borrow relative to their income — preventing the kind of over-leveraging that fuelled previous booms.

Alexander’s view is echoed by Westpac’s Satish Ranchhod, who notes that:

“Increases in available property are limiting price growth”
and
“There isn’t an oversupply of homes, but there are no longer the shortages that boosted prices in previous years.”

The New Investor Playbook

• Focus on cash flow, not capital gains. The days of buying a negatively geared property and banking on it doubling in value are over. Your investment needs to work on a cash flow basis from the start. With interest deductibility restored and rates low, this is achievable now.
• Run the numbers. If you’re not breaking even (or better) on a property within 12 months, don’t buy it. Factor in all costs — rates, insurance, maintenance, property management, vacancies — and make sure the rent covers it.
• Hunt for bargains. Investors in 2025 are paying less than they did in 2024, even though they’re still buying standalone houses. They’re being disciplined and walking away from overpriced properties. With inventory at an 11-year high, you have leverage. Use it.
• Buy where rental demand is strong. University towns, employment hubs, desirable school zones — these outperform oversupplied areas. Research vacancy rates, average days to let, and tenant quality before you buy.
• Consider new builds for LVR exemptions. They’re still attractive even without tax perks. Why? Because they’re exempt from LVR and DTI caps, meaning lower deposit requirements and higher borrowing potential.
• Leverage equity strategically. Equity in your own home is your ticket in. That’s exactly how most of today’s small-scale investors are entering the market.

Different This Time

The investor comeback of 2025 is real. But this time it’s measured, cash-flow-driven, and based on fundamentals.

Interest deductibility is back, mortgage rates are down, the bright-line test is short, and house prices are 17% below peak.

The pendulum has swung back in landlords’ favour (at least for now), and the opportunity to build wealth through property investment is alive and well. The market needs rental housing — and we need investors.

Right now, there’s room for both investors and first-home buyers to coexist without one crowding out the other.

Thinking about your first investment property?
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