The muted property market has been reflected by a muted response from the investors who took part in the latest New Zealand Property Investor magazine investor sentiment survey.

House prices are currently stagnant – the most recent data from Cotality (formerly CoreLogic) reveals that shows that median property values have edged up by only 1 per cent in the past 3-4 months.

And investors are feeling this. When asked around expectations of property values, 45 per cent stated that prices would stay the same. Even though this was offset by the 45 per cent who felt prices may rise, the remaining 8 per cent believed the prices would decline – tipping the scale towards neutral of negative sentiment.

The changes to legislation around the 90-day, no-stated-cause terminations, the reinstatement of interest deductibility, and lower interest rates were predicted to increase buyer activity. But this hasn’t played out the way pundits thought – other factors including the soft labour market and debt-to-income ratio limits for mortgage lending, are keeping the market in in check.

Matt Ball from New Zealand Property Investors Federation (NZPIF) says that the low-key sentiment expressed in the survey reflects what they are seeing on the ground.

“The feedback is that there are still opportunities for the canny investor, who puts in the time and effort to find that property with a good yield or potential for improvement, but there are a number of factors holding back a wider market recovery.

“Income (rent) is down, and costs (rates, insurance, maintenance) are up. Interest rates are falling, but it will be 6-12 months to feel the full benefit and the money clawed back will largely be used to make up for previous losses or cover higher costs.”

The spectre of global economic unrest due to Trump tariffs is also lingering – plus uncertainty about next year’s election.

“There is a lack of confidence that interest deductibility will remain in place. Add in low migration, high unemployment and a subdued New Zealand economy, and it’s not hard to see why many are in wait-and-see mode.”

Let’s dig down into the results to find out how New Zealand investors are feeling about the market.

The basics

Auckland once again topped the charts when it came to the amount of investment properties. Forty per cent of respondents stated that they owned properties in Auckland, with Canterbury coming second on 22 per cent, and the Wellington region on 20 per cent.

The stats shows that the vast majority of landlords weren’t “mega-landlords” – it’s a sector proliferated with “mums and dads” who invest for future security.

Forty per cent of respondents stated that they owned between one and four properties, 18 per cent owned between six and ten, and 23 owned between 10 and 20 properties. Only four per cent owned more than 20 properties.

‘New build has limited opportunities to add value, and you are competing against the same product in the same market. In the case of two-bedroom townhouses, good luck having a point of difference in rentals or when selling’

Survey respondent

The section on motivations reflect the preponderance of landlords investing sensibly for the future.

When asked the most important driver when considering investment properties, 37 per cent listed long-term value growth. Cash-flow creation came in second, with 26.8 per cent of respondents listing this as their most important driver. The least important drivers were equity creation, followed by reduction of debt and generation of income.

Landlord concerns

Landlord concerns have changed considerably since the survey was conducted last year.

In 2024, an overwhelming 85 per cent stated interest rates were their primary concern; this year the 62 per cent of respondents listed that finding good tenants was at the top of mind. Ball states that this also aligns with what NZPIF is hearing.

“This is not surprising given what we hear from landlords around the country daily, and it’s just simple supply and demand.

“There are a record number of properties for rent – the highest in a decade according to Trade Me – and there isn’t the demand there for that supply. End result is it’s harder to find good tenants and rents are under pressure, with significant falls in rent in some places.”

David Faulkner, general manager of property management at Property Brokers, says there are other factors coming into play.

“There are a multitude of reasons why landlords are finding properties hard to rent. Net migration, sluggish economy, increase in stock and less tenant movement are probably the biggest drivers.”

Low yields are also a concern, at 52 per cent, with lender’s servicing criteria and interest rates coming third at 30 per cent.

Credit availability

When the Credit Contracts and Consumer Finance Act (CCCFA) rules were ramped up in November 2021, mortgage advisors and those in the market for a new mortgages were thrown in the deep end.

The previous rules had been around since 2015, but the new tightening of the rules meant banks needed to scrutinise every Netflix bill and Uber Eats meal their client dialled up after a hard day in the office.

It led to loans being declined for ridiculous reasons, and made credit harder to come by.

Outcry ensued and the Labour government softened the rules; and these were further modified in July last year, enabling banks to have more wriggle room when assessing discretionary spending.

The outcome of this has flowed on to investors. When asked last year if they had any difficulty getting access to finance, 43 per cent stated “yes”. This has been reduced to 33 per cent this year.

“The test rates that banks use to assess affordability have dropped very fast in recent times which has made it a lot easier for lenders to meet bank requirements,” says Pedersen.

“While I still think some parts of the criteria are unnecessarily onerous, there is overall a lot more common sense being used than what we saw a few year ago with the CCCFA debacle, which effectively shut down mortgage credit for a while.”

Our respondents are loyal to their lenders – 56 per cent have lending with just one lender, with 17 per cent having two lenders and 26 per cent using three or more.

But Kris Pedersen, this year’s survey sponsor and owner of Kris Pedersen Mortgages, says this is not ideal

“We do not recommend it. Banks definitely make the process easy, but investors need to keep in mind that they cross-secure the loans and properties together behind the scenes and this can cause multiple issues – from making it hard to continue to grow your investment portfolio if that lender says no, to having full control if the investor ends up in a difficult position and may need to sell.

“Investors need to keep in mind that it is now common practice for lenders to put you through a full application process if you are looking to discharge a security and retain debt with a bank. What has happened a lot in recent years is investors selling down because of the higher interest rate environment only for the bank to take all of the sales proceeds because of the cross-security and the client’s inability to meet the banks current lending requirements.”

Non-bank lenders are also increasing in popularity, with nearly 60 per cent using (or considering) non-bank lenders.

“Awareness [around non-bank lenders] has grown significantly in recent years,” says Paul Bendall, CEO of First Mortgage Trust.

“This shift is part of a broader global trend toward private credit. As traditional banks continue to be inflexible in their approach to lending, particularly when transactions are complex or fall outside standard criteria, borrowers are seeking more pragmatic, solutions-focused alternatives.”

On the up

Kris Pedersen says there is optimism in the market, if you look beneath the surface.

It can be quite easy, if you just keep an eye on the mainstream media, to think that property investor appetites have not changed at all from a year ago.

Scratch beneath the surface, though, and investor lending was up 65 per cent this March in comparison to the equivalent month last year.

It’s easy to argue that the market can’t be moving as there hasn’t been much talk of prices moving up. But the supply of listings we have seen has so far this year has been greater than the demand coming from buyers – at some stage this balance will tip.

We are almost on the 12-month anniversary from when Adrian Orr incomprehensibly decided to state that “real consideration” was given to a further rate hike. Two months later the Reserve Bank saw reason and proceeded to start their rate-cutting cycle, which has seen the OCR drop from 5.5 per cent then down to the 3.5 per cent we see today. Some economists still suggest we may see further cuts down to 2.5 per cent.

As a mortgage advisory business dealing predominantly with investors, we went from basically no one wanting a preapproval a year ago, to a surge of investors contacting us to get ready to buy. This surge increased with each rate cut.

The two main parts credit plays in the property cycle are the cost of credit and how easy credit is to get.

The cost side is clearly getting cheaper we are seeing signs of credit getting easier as well.

A major bank recently announced they would do 10-year interest-only loans and we recently have had a non-bank lender introduce mortgages up to 90 per cent LVR (only a 10 per cent deposit) for existing property.

Those who have been through previous property cycles know that these changes tend to be signs of a property market recovering.

The investors we are seeing now realise that the current economic malaise means that in the short term there are still likely to be a higher-than-normal number of vendors who are forced into sale situations, which results in the ability to purchase property for under market value.

If they wait until the power balance swaps from buyers back to sellers, they will have to pay more for property than what they can buy it for today.

Trump and his tariffs will make some people stay out of the market, but there are always some people who need a reason to procrastinate and do nothing. I suspect that the vast majority of investors who made the decision to buy this year will look back and be happy that they did so.

Brought to you by krispedersen.co.nz

‘I prefer to do my own inspections and manage my own rent payments from tenants and have contact with tenants to form relationship. We have sold two rentals to long standing tenants’

Survey respondent

Rent rises

One of the most interesting results from the survey is around intentions to increase rent.

Given landlords’ concerns about finding tenants, it is interesting to note that 57 per cent of landlords were considering increasing their rents considerably in the next 12 months. Over 50 per cent were looking at an increase of 3-5 per cent and nearly 13 per cent considering an increase of over 10 per cent.

“This is strange, given the current state of the rental market,” says Ball from NZPIF.

“It could reflect the cost pressure landlords are under, but it could also be the triumph of hope over experience. Investors in many areas are having to cut asking rents by hundreds of dollars, prospective tenants are proactively asking for lower rents, and some sitting tenants are asking for rent reductions.”

He says that there are some circumstances in which landlords could get a rent increase, for example if they are currently charging well below market rent.

“I have seen evidence that up to half of landlords have properties that are significantly under-rented, to the point that even a 10 per cent increase would leave them well below even current market rent levels,” he says.

But he continues that there is still strong demand for in some areas and for some types of property, and in these cases rent increases may be achievable.

“Finally, a landlord may have made improvements to a property, which can support a rent increase,” he says.