Introduction

A growing chorus of commentators has questioned whether residential property investment in New Zealand still makes sense. As financial adviser Katie Wesney observed in a recent opinion piece for Stuff, "over the past year, a growing number of commentators have questioned whether property investment in New Zealand still works" [1]. The argument typically runs as follows: house prices do not always go up, global shares have outperformed in recent years, and New Zealand property looks expensive relative to incomes.

These are legitimate observations, and no prudent adviser would dismiss them. However, when the question is examined through the lens of the ordinary "mum and dad" investor, the case for residential property remains compelling. Property is an asset class that everyday New Zealanders understand intuitively, can fund from existing equity, and can hold with confidence over the long term. This article explains why.

1. Property Is an Asset Class That Ordinary Investors Understand

One of the most underappreciated advantages of residential property is its simplicity and tangibility. When a mum and dad investor purchases a rental property, they are buying something they can see, touch, and personally evaluate. They understand the neighbourhood, they can assess the condition of the building, and they have a practical sense of what tenants are willing to pay. This stands in stark contrast to the complexity of securities markets, where investors must navigate concepts such as price-to-earnings ratios, foreign investment fund (FIF) tax rules, currency hedging, and the volatility of global indices.

As MoneyHub New Zealand acknowledged in its comprehensive 2026 comparison guide, "inexperienced share investors often panic-sell during market downturns, locking in losses that might have recovered given time" [2]. Property's relative illiquidity, while sometimes seen as a disadvantage, can in fact protect investors from their own worst instincts during turbulent times. The process of selling a property takes weeks or months, which naturally prevents the kind of impulsive decision-making that destroys wealth in share markets.

The behavioural dimension matters enormously for ordinary investors. Research consistently shows that the average retail investor underperforms the very funds they invest in, precisely because they buy high and sell low in response to market sentiment. Property investors, by contrast, tend to hold through cycles, and history rewards them for doing so.

2. Funding Is Easier: The Power of Existing Equity

Perhaps the single most important structural advantage of property investment for mum anddad investors is the ability to leverage existing equity in the family home to fund the purchase of an investment property. As the BNZ explains on its lending guidance page, "your bank may agree to let you borrow against your home's equity, and use it as a deposit for buying an additional property" [3]. Most New Zealand banks allow homeowners to access up to 80% of their home's value, and the equity above that threshold can serve as the deposit for a rental property [4].

This mechanism is simply not available for securities investment. As Wesney noted in her Stuff article, "property remains one of the few asset classes where ordinary investors can access meaningful leverage through bank lending. You cannot walk into a bank and borrow 80% of the purchase price of an index fund" [1]. While margin lending exists for shares, it is far riskier, less accessible, and subject to margin calls that can force investors to sell at the worst possible time.

The following table illustrates the practical difference in funding pathways:

For a couple who purchased their home ten or fifteen years ago and have built up substantial equity through a combination of mortgage repayments and capital growth, the pathway to acquiring a rental property is straightforward and well understood. The same couple would face a far more complex and unfamiliar process if they wished to invest a comparable sum in global equities.

3. A Proven History of Long-Term Price Growth

New Zealand's Track Record

The long-term record of residential property prices in New Zealand is one of sustained growth, notwithstanding periodic corrections. According to data compiled by property commentators and the Real Estate Institute of New Zealand (REINZ), house prices in New Zealand have risen on average 7.2% per year since 1992, with Auckland prices rising at approximately 8.2% per year over the same period [5]. REINZ data also confirms that

Auckland house prices grew at an average of 5.83% annually from 2003 to 2023 [2].

A Stuff report from February 2025 found that average asking property prices had more than doubled in nine of New Zealand's nineteen regions over the preceding decade [6]. As at January 2026, the national average sale price stood at approximately $910,285 [7].

It is true that the market experienced a sharp correction following the 2021 peak, with national values falling approximately 16% from their highs [8]. However, as Wesney rightly observed, "short-term price falls are not evidence that the long-term case for property is broken. They are evidence that leverage and timing matter" [1]. The investors who struggled most were those who borrowed at very high debt levels, purchased low-quality or poorly located properties, had no cash buffer, and assumed interest rates would remain low indefinitely. That is a failure of risk management, not a failure of property as an asset class.

The Global Picture

New Zealand's experience is consistent with the global pattern. According to the Bank for International Settlements (BIS), global real residential property prices have increased by 3.5% since the COVID-19 pandemic, and among G20 economies they have risen by 112% over a longer horizon [9]. Since the Global Financial Crisis of 2007 to 2009, global real house prices have risen by 21% across advanced economies [10]. A landmark study published by the London School of Economics, examining global house prices since 1950, found that between 1993 and 2007 most countries experienced house price growth twice as fast as in the preceding decades [11].

The fundamental drivers of long-term property price growth remain intact: population growth, urbanisation, land scarcity in desirable locations, and the basic human need for shelter. As Wesney noted, "housing is still a basic need" and "New Zealand continues to experience urban concentration, particularly in Auckland" [1].

4. The Tax Position Has Improved Significantly

Full Interest Deductibility Restored

One of the most significant recent developments for property investors is the full restoration of mortgage interest deductibility from 1 April 2025. As confirmed by Inland Revenue, "from 1 April 2025 you can claim 100% of the interest you incur" on residential investment property [12]. This reverses the interest limitation rules introduced by the previousgovernment from 1 October 2021, which had progressively restricted and then eliminated the ability to deduct interest costs.

The phased restoration, implemented by the National-ACT government, proceeded as follows:

Source: Inland Revenue, "Residential property interest limitation rules" [12]

This restoration provides what can fairly be described as a tax-neutral position for property investors. Mortgage interest, which is typically the largest single expense associated with holding a rental property, is now fully deductible against rental income. This means that the net taxable income from a rental property more accurately reflects the true economic position of the investor, rather than being artificially inflated by the denial of a legitimate business expense.

As Opes Partners noted in their 2026 tax guide, "from April 1, 2025 all property investors can once again deduct 100% of their mortgage interest. We're going back to the old way of calculating property tax" [13]. Crockers Property Management similarly confirmed that the interest limitation rules ended in April 2025, restoring the pre-2021 position [14].

The Bright-Line Test

The bright-line test has also been significantly shortened. From 1 July 2024, the bright-line period was reduced to two years, down from the previous ten-year period introduced by the former government [15]. This means that any property held for more than two years is not subject to the bright-line test, and any capital gain on sale is not taxable under this provision. For mum and dad investors who intend to hold their investment property for the long term, the bright-line test is effectively a non-issue.

The Unfairness of the Foreign Investment Fund (FIF) Tax on Overseas Shares

By contrast, the tax treatment of overseas share investments is significantly less favourable and, in many respects, fundamentally unfair. New Zealand's Foreign Investment Fund (FIF)regime requires tax residents who hold more than $50,000 in overseas shares to pay tax eachyear on a deemed income calculated as 5% of the market value of those shares as at 1 April, under the Fair Dividend Rate (FDR) method [18] [19]. Critically, this deemed income is taxable regardless of whether the investor has actually received any income or made any gain. The tax is levied on the opening market value of the holdings, not on actual returns.

The practical consequence of this regime is deeply inequitable. If an investor holds $200,000 in overseas shares on 1 April and the value of those shares subsequently falls by 15% over the following twelve months, the investor has suffered a real economic loss of $30,000. Nevertheless, under the FDR method, the investor is deemed to have earned income of $10,000 (being 5% of the $200,000 opening market value) and must pay tax on that amount at their marginal tax rate. At a marginal rate of 33%, this means a tax liability of $3,300 on an investment that has actually lost money. The investor is, in effect, being taxed on income they never received and gains they never made.

This is a particularly important consideration for mum and dad investors who are advised to invest in managed funds or KiwiSaver growth funds, because the majority of New Zealand fund managers invest predominantly in overseas shares [20]. Whether an investor holds overseas shares directly through platforms such as Sharesies or Hatch, or indirectly through a managed fund or PIE fund, the underlying exposure is overwhelmingly to foreign equities that fall within the FIF regime. The tax drag is therefore an unavoidable feature of share-based investment for most New Zealand investors.

The contrast with property investment could not be starker. A rental property investor pays tax only on actual net rental income received, after deducting all legitimate expenses including mortgage interest. If the property falls in value, there is no deemed income and no tax liability arising from that decline. The tax system for property aligns with economic reality; the FIF regime for overseas shares does not.

5. Mum and Dad Investors Are Returning to the Market

The data confirms that ordinary New Zealand investors are recognising these advantages and returning to the property market. According to Cotality (formerly CoreLogic New Zealand), mum and dad investors with smaller portfolios are driving the investor comeback, particularly within cheaper pockets of the housing market [8]. Their share of purchases in the bottom 30% of properties by value rose from 21% in 2024 to 24% in 2025. Smaller investors, defined as those with a total portfolio of up to four properties including their own home, saw their share of the market rise from 12% to 14% [8].

Cotality attributed this trend to several factors: the restoration of interest deductibility on existing properties, lower mortgage rates reducing the weekly cashflow top-up required, and the availability of bargains in a market where listings are plentiful. The typical weekly top-up for a rental property has fallen from $400 to $500 per week to approximately $200 per week [8].

It is also worth noting that private landlords provide 85% of New Zealand's rental housing [16], and nearly 80% of landlords own just one investment property [17]. The rental property market in New Zealand is overwhelmingly a market of ordinary people, not largecorporate investors. The mum and dad investor is the backbone of the country's rental housing supply.

6. Property vs Shares: A Balanced Perspective

It would be disingenuous to suggest that property is superior to shares in every respect. Shares offer genuine advantages in terms of liquidity, diversification, low entry costs, and minimal ongoing management. Global index funds have delivered strong returns, with the S&P 500 averaging 9.8% annual returns over the twenty years from 2003 to 2023 [2].

However, the comparison must be made on a like-for-like basis. The following table presents a fair summary:

The critical point is not that property is "better" than shares in the abstract, but that for the typical mum and dad investor, property offers a combination of familiarity, leverage, and funding accessibility that shares simply cannot match. The couple who has spent twenty years paying down their mortgage understands property. They can evaluate a rental in their local area with confidence. They can walk into their bank and arrange funding against their existing equity. None of this requires specialist financial knowledge or comfort with the volatility of global markets.

7. Practical Considerations for Prudent Investment

The case for property investment is not a case for reckless speculation. As Wesney wisely cautioned, "the era of easy gains may be behind us. The case for thoughtful investing is not" [1]. Investors who approach property with discipline and realistic expectations will be well served. Those who over-leverage, ignore cash flow, or assume double-digit annual growth will not.

The following principles should guide any mum and dad investor considering a property purchase:

Maintain adequate cash reserves. The property market rewards those who can hold throughcycles. A cash buffer of at least six months of expenses, including mortgage payments, rates, and insurance, provides essential resilience against unexpected vacancies or interest rate movements.

Focus on yield and location quality. In a market where rapid capital gains are less certain, the quality of rental income becomes paramount. Properties in areas with strong tenant demand, good infrastructure, and proximity to employment centres will outperform over the long term.

Use leverage prudently. The ability to borrow against home equity is a powerful advantage, but it must be used with care. Conservative loan-to-value ratios and stress-testing against higher interest rates are essential disciplines.

Take advantage of the current tax settings. With 100% interest deductibility restored from April 2025 and the bright-line test reduced to two years, the tax environment for property investors is the most favourable it has been in several years. Investors should ensure they are claiming all legitimate deductions and structuring their affairs efficiently.

Think long term. Property is a long-term asset class. The investors who have built genuine wealth through property are those who purchased sensibly, held through cycles, and allowed the combination of capital growth, rental income, and mortgage repayment to compound over decades.

Conclusion

The narrative that property investment is "over" does not withstand scrutiny. While the market has undeniably changed, with higher interest rates, stricter lending standards, and more modest short-term growth expectations, the fundamental case for residential property as a wealth-building tool for ordinary New Zealanders remains strong.

Property offers mum and dad investors an asset class they understand, a funding mechanism that leverages their existing equity, a proven history of long-term price appreciation both in New Zealand and globally, and a tax framework that, with the restoration of full interest deductibility, now provides a neutral and fair position. These are advantages that securities markets simply cannot replicate for the average household investor.As Wesney concluded, "no asset class is guaranteed. Property in New Zealand is no longer effortless. But that is not the same as saying property no longer works. For disciplined investors with a long-term horizon, realistic expectations, and appropriate financial buffers, property remains a viable part of a diversified strategy" [1].

The era of easy gains may indeed be behind us. The case for thoughtful, well-informed property investment is not.

Need Help?

If you are contemplating investing in residential rental property, or if you already own investment properties and want to ensure your affairs are properly structured, Greenlane Chartered Accountants can assist you at every stage of the journey. Our team has extensive experience advising mum and dad investors on the financial, tax, and compliance aspects of property investment. The following is a summary of the services we offer.

Pre-Purchase Advisory

Before you commit to purchasing an investment property, it pays to obtain professional advice. We can assist you with evaluating the financial viability of a proposed purchase, including projected rental yields, cash flow modelling, and the impact of mortgage interest, rates, insurance, and maintenance costs on your overall position. We advise on the most appropriate ownership structure for your circumstances, whether that is personal ownership, a family trust, a look-through company (LTC), or a partnership, taking into account asset protection, tax efficiency, and your long-term objectives. We also provide guidance on the tax implications of the purchase, including GST considerations, the bright-line test, and the interaction between your investment property and your existing tax affairs.

Annual Financial Statements and Tax Returns

Once you own a rental property, there are ongoing compliance obligations that must be met each year. We prepare annual rental property financial statements that accurately record all income and expenditure, ensuring that every legitimate deduction is claimed. This includes mortgage interest (now 100% deductible from April 2025), rates, insurance, property management fees, repairs and maintenance, depreciation on chattels, and other allowable expenses. We prepare and file your annual income tax return, incorporating your rental property income and ensuring full compliance with Inland Revenue requirements. Where you hold properties in a trust or company structure, we prepare the entity's financial statements and tax returns as well.

Ongoing Tax Advice and Planning

The tax landscape for property investors has changed significantly in recent years, and staying informed is essential. We provide ongoing advice on matters such as the deductibility of interest and other expenses under current legislation, the application of the bright-line testand other property sale rules, ring-fencing of rental losses and how this affects your overall tax position, the implications of any proposed changes to tax policy, including any future capital gains tax proposals, and structuring and restructuring of property holdings to optimise your tax position as your portfolio grows. We also assist with Inland Revenue correspondence, audits, and disputes should they arise.

Property Portfolio Reviews

For clients who already hold one or more investment properties, we offer a comprehensive portfolio review service. This involves assessing the performance of each property, reviewing your ownership structures, identifying opportunities to improve cash flow or reduce tax, and ensuring that your property investments are aligned with your broader financial goals.

Whether you are purchasing your first rental property or managing an established portfolio, we are here to help you make well-informed decisions and meet your obligations with confidence. Please contact Greenlane Chartered Accountants to arrange a consultation.

Disclaimer: The information in this article is of a general nature and is not intended to be personalised financial advice. It does not take into account your individual circumstances or financial goals. While all information is believed to be accurate at the time of publication, Greenlane CA Limited and Daran Nair accept no responsibility or liability for any loss incurred as a result of reliance on this information, except as required by law. Readers should seek professional advice tailored to their own circumstances before making investment decisions.

References

[1]: K. Wesney, "Is property investment really over? Not so fast," Stuff, 5 March 2026. https://www.stuff.co.nz/home-property/money

[2]: C. Walsh, "Shares vs Property: Which Is the Better Investment in New Zealand - The Complete 2026 Guide," MoneyHub NZ, updated 11 February 2026. https://www.moneyhub.co.nz/shares-vs-property.html

[3]: BNZ, "How to use your home equity to buy rental property." https://www.bnz.co.nz/personal-banking/life-moments/how-to-use-your-home-equity-to-buy-rental-property[4]: Optimise Finance, "Using Equity to Buy a Second Property."https://www.optimisefinance.co.nz/insights/using-equity-to-buy-a-second-property-what-

you-need-to-know

[5]: S. Goodey, "New Zealand Property Market Cycles - 1978 to 2025," Steve Goodey Property Coach, August 2025. https://www.facebook.com/SteveGoodeyPropertyCoach/

[6]: "How property prices have changed in a decade," Stuff, 12 February 2025. https://www.stuff.co.nz/home-property/360578314/how-property-prices-have-changed-

decade

[7]: Trading Economics, "New Zealand Residential Average Sale Price," January 2026. https://tradingeconomics.com/new-zealand/average-house-prices

[8]: Cotality (formerly CoreLogic NZ), "Investor comeback: 'Mums and Dads' are eyeing up cheaper, existing properties," 17 July 2025. https://www.cotality.com/nz/insights/articles/investor-comeback-mums-and-dads-are-eyeing-up-cheaper-existing-properties

[9]: Bank for International Settlements, "BIS residential property price statistics, Q2 2025," November 2025. https://www.bis.org/statistics/pp_residential_2511.htm

[10]: Bank for International Settlements, "BIS residential property price statistics, Q1 2025," August 2025. https://www.bis.org/statistics/pp_residential_2508.htm

[11]: London School of Economics, "Global house prices since 1950," CFM Discussion Paper, October 2023. https://www.lse.ac.uk/CFM/assets/pdf/CFM-Discussion-Papers-2023/CFMDP2023-07-Paper-2.pdf

[12]: Inland Revenue, "Residential property interest limitation rules." https://www.ird.govt.nz/property-interest-rules

[13]: Opes Partners, "Interest Deductibility in NZ: 2026 Tax Rules." https://www.opespartners.co.nz/tax/interest-deductibility

[14]: Crockers Property Management, "Interest Limitation Rules Ending April 2025." https://www.crockers.co.nz/property-management-auckland/news/when-do-the-interest-limitation-rules-end/

[15]: Opes Partners, "Bright-Line Test in NZ [2026]: Do You Need to Pay Tax?" https://www.opespartners.co.nz/tax/bright-line

[16]: J. Kenel, "Private landlords provide 85% of NZ's rental housing," LinkedIn, 2025. https://www.linkedin.com/posts/johnkenel_private-landlords-provide-85-of-nzs-rental-activity-7393485087788625920-fOHi

[17]: "Nearly 80 per cent of landlords own just one property, data shows," Stuff, 25 February 2021. https://www.stuff.co.nz/life-style/homed/real-estate/124320645/nearly-80-per-cent-of-landlords-own-just-one-property-data-shows

[18]: KPMG, "Foreign Investment Fund Regime 2025." https://assets.kpmg.com/content/dam/kpmg/nz/pdf/2024/12/foreign-investment-fund-regime.pdf

[19]: Inland Revenue, "Guide to foreign investment funds and the fair dividend rate" (IR461). https://nztaxprop.co.nz/wp-content/uploads/2021/08/IR461-2021.pdf

[20]: MoneyHub NZ, "Tax on Investments and Savings in a Nutshell 2026." https://www.moneyhub.co.nz/tax-on-investments-and-savings.html