The great property breakup

2026-03-06 - 16:06

It’s been a national obsession for decades – buying property and creating wealth through soaring capital gains. But the days of making huge, untaxed profits on such investments are likely over. The Reserve Bank’s chief economist says we may be seeing a “structural change” in the housing market; there are too many empty townhouses failing to sell; prices are going sideways; and the prospect of a capital gains tax being introduced is becoming more certain. First-home buyers are making a comeback. But is it too early to say we’re seeing the end of the housing crisis? Today on The Detail we look at where we’re sitting, with experts saying while there’s no shortage of homes available now, that doesn’t necessarily make them affordable. There are several factors behind the shift. Younger investors who know they can’t afford to get a foot on the property ladder are turning to KiwiSaver and managed funds – they’re the ‘Sharesies’ generation. The ASB’s latest Investor Confidence Survey says traditional property investment is losing ground to options that provide better returns. New intensification rules have seen developers replace traditional single-home sections with townhouses; so much so that the market is now awash with them. Rents are falling – it’s now a tenants’ market – meaning returns on property are less certain. Rock-bottom interest rates, which encouraged debt, are unlikely to ever return. And the ANZ’s chief economist, Sharon Zollner, says there’s an inevitability of new taxes that would dent profit margins in property. She says maybe a Capital Gains Tax is not on our doorstop, but it will come eventually. “How long can New Zealand really remain such an outlier internationally, and refuse to have that conversation?” she says. “I do wonder if people are starting to think that perhaps there’s an inevitability around tax change.” Zollner says first-home buyers have got the field to themselves and some of them are taking advantage of it. “But then the immediate question is, why have they got the field to themselves? Where are the investors? And I think that’s where it gets interesting.” She says investors seem to be wary. Adding to the uncertainty has been a very strong outflow of Kiwis to Australia, and they are putting their own houses on the market. “While interest rates have come down a long way, they’re nowhere near the lows we saw in the boom, and now it’s a question of when they’ll be hiked.” But Zollner says there are bigger structural issues. “Can we expect similar returns from the next 10 years say, in the housing market, that we’ve seen over the last decades? And there I think more people are realising, probably not.” BusinessDesk property editor Maria Slade believes we are on the cusp of a change. “Perhaps people are starting to see houses as something you live in, and not necessarily an investment,” she says. “Successive governments have tightened the rules around property investment. It’s not quite as attractive as it used to be. And also the costs have made it less attractive – insurance has gone up, rates have gone up ... you’ve got to be getting pretty good rents to get a good yield out of an investment property now. So that’s also, I think, changed the mindset a wee bit. “I think the tide has turned in terms of how New Zealanders are looking at property.” Slade says that’s a good thing. “We have way too much wealth tied up in property – it’s unproductive wealth, it just sits there on a 700 square metre section ... it’s not doing anything for the country. “We definitely need to get over that one if the country’s going to become more prosperous going forward.” As an example of change, Slade has been looking at what commentators are saying is a glut of townhouses, and the consequences of that. Some are sitting on the market for so long they’re no longer considered ‘new builds’, which means favourable lending for first-home buyers doesn’t apply. In spite of the stagnant market, new data from Infometrics shows consents for townhouses grew by 14 percent from the year to January. In today’s podcast, Slade talks about some possible reasons for that, including a possible move away from cookie cutter-style homes without car parks to less crowded buildings. Kelvin Davidson, the chief Property Economist at Cotality, hedges his bets when asked if the housing crisis is over. “It depends what you mean by ‘housing crisis’,” he says. “I suppose what people think about ... over the past 20 or 30 years is an affordability crisis where house prices have been too high in relation to incomes and it’s been a stretch for people to get onto the housing ladder. “I don’t think it’s ever been easy to buy your first house. It’s been a challenge through time. “So is that crisis over? Maybe. “I think we may be reaching a turning point in the market now, where the mindset is shifting and people are starting to realise that actually, ever-rising house prices isn’t necessarily the best thing for a country.” Check out how to listen to and follow The Detail here. You can also stay up-to-date by liking us on Facebook or following us on Twitter.