At the same time, various pressures have been changing the economics of property investment.<\/p>\n
Those 200 surveyed investors singled out concerns about higher running costs, rising council rates, ongoing challenges in securing reliable tenants and economic uncertainty over the Iran war.<\/p>\n
That uncertainty is further illustrated by new figures showing sellers have been slashing asking prices by tens of thousands of dollars, with some still trying to offload houses they bought at the market\u2019s 2021 peak.<\/p>\n
For many smaller investors, it appears the model that once relied on steady capital gains is becoming harder to sustain.<\/p>\n
Credit, costs and a changing market<\/p>\n
![\"House](\"https:\/\/www.newsbeep.com\/nz\/wp-content\/uploads\/2026\/05\/house-property-generic-keys-ZTBQZJJLCZBTZL6D4CKY6T2FVQ.jpg\")
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House keys (file photo). (Source: istock.com)<\/p>\n
In New Zealand and around the world, arguably the single biggest driver of housing markets is bank credit, or debt.<\/p>\n
Real estate values depend not only on supply and demand, but also on the purchasing power of buyers. As few people have enough cash to purchase property outright, most rely on bank credit.<\/p>\n
Housing market commentators often benchmark New Zealand prices against their peak in late 2021. This happened to coincide with amendments to the Credit Contracts and Consumer Finance Act, which tightened how banks assess lending affordability.<\/p>\n
Although politicians reversed course six months later, the restriction in housing credit reduced homebuyers\u2019 aggregate purchasing power. House prices have yet to recover to their 2021 highs.<\/p>\n
Another squeeze on housing credit came with the Reserve Bank\u2019s debt serviceability restrictions, called debt-to-income limits. These cap how much borrowers can take on relative to their income: six times income for owner-occupiers and seven times for investors.<\/p>\n
While these limits weren\u2019t formally introduced until mid-2024, they were added to the Reserve Bank\u2019s policy toolkit during the market\u2019s June 2021 peak, with banks phasing them in gradually.<\/p>\n
At the same time, two-year fixed mortgage rates more than doubled, from 3.46% in April 2021 to 7.60% in October 2023. Right now, they\u2019re sitting closer to the mid-5% range, easing from their peak \u2013 but still well above recent lows, with a risk of further hikes.<\/p>\n
With the housing boom now fading into the distance, many New Zealanders are confronting an uncomfortable reality: house prices do not always rise, and capital gains are not guaranteed.<\/p>\n
That caution is already showing up in the data.<\/p>\n
Recent figures point to softer sales volumes and subdued buyer activity, with rising borrowing costs and wider economic uncertainty \u2013 including the prospect of further inflationary pressure from the Middle East crisis \u2013 weighing heavily on confidence.<\/p>\n
The current market malaise affects everyone, but mum-and-dad investors arguably face the toughest conditions. Without capital gains, rental property can be a poor investment given the risks involved.<\/p>\n
A reset for the housing market?<\/p>\n
![\"Houses](\"https:\/\/www.newsbeep.com\/nz\/wp-content\/uploads\/2026\/05\/houses-in-wellington-file-image-EXWEILIE6BGSFNJTUJE4DUSZ7M.png\")
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Houses in Wellington (file image). (Source: istock.com)<\/p>\n
For investors having to top up mortgage payments out of their own income because rent no longer covers the costs, the warning signs are clear.<\/p>\n
Because these investors are major users of mortgage lending \u2013 often borrowing against existing equity to buy more property \u2013 a large-scale exit would slow the flow of housing credit that has long underpinned rising prices.<\/p>\n
That would be disruptive and destabilising to what has long been a key plank of New Zealand\u2019s economy. Yet a pullback by small-scale investors could also have positive effects elsewhere in the market.<\/p>\n
New Zealand is grappling with deepening housing inequality, with a widening divide between those who own property and those locked out of it.<\/p>\n
Average house prices may have fallen over recent years, but they still sit at around 7.2 times the median household income. In some regions, such as Queenstown Lakes and Thames-Coromandel, price-to-income ratios remain well into double digits.<\/p>\n
With fewer investors competing for existing homes, price pressures could ease, improving access for first-home buyers, encouraging more stable, institutional build-to-rent developments and shifting the market away from speculative gains.<\/p>\n
There may also be opportunities to redirect capital into more productive uses.<\/p>\n
Funds withdrawn from housing could instead flow into lower-risk, income-generating assets such as Kiwi Bonds or other government-backed investment vehicles, offering steadier returns while supporting broader public investment.<\/p>\n
That kind of shift could provide investors with steadier returns, while helping rebalance a housing system that has long relied on ever rising prices.<\/p>\n
Michael Rehm is an associate professor in property at the University of Auckland.<\/p>\n