Commercial property is generally rented, making this segment a significant investment market in the country. The office segment leads this market in terms of sales and property transfers. The construction sector has been booming, and new buildings are subject to stricter building regulations to ensure the quality of dwellings is continually improved.
Housing affordabilityHousing affordability has become an important issue across the country. With house prices rising disproportionally compared to incomes, many believe New Zealand is in a property bubble. The home ownership rate was at its lowest level since 1951, partly due to rising house prices across the country. New Zealand has one of the highest house price-to-income ratios in the world, as well as the highest house price compared to rent.
In an attempt to tackle the affordability problem, in 2018, the New Zealand government passed legislation that would only allow New Zealand residents, Australians, and Singaporeans to buy homes in the country, restricting residential property buying by foreign investors. Furthermore, in 2021, a capital gains tax was introduced for residential investment property sales in New Zealand. This tax applies to profit made from homes that are sold within five years of purchase. In terms of home financing, the majority of residential mortgage lending went to owner-occupiers where the property was not their first home, indicating New Zealanders were upgrading or downgrading their existing dwelling.