In recent years, the rapidly rising costs of residential property have initiated changes in property law, specifically relating to discouraging investment home purchasing. 2022 showed some signs of movement in property prices, with house prices falling nationwide in December that year. Nonetheless, it may still take some time to see significant changes in housing affordability in New Zealand’s property market and a rise in the homeownership rate.
Commercial real estateCommercial properties in New Zealand are widely available, with supply continually being built. The market includes office, retail, accommodation, mixed-use, and industrial buildings. Industrial and office properties are in strong demand, with the office segment leading the market in terms of sales and property transfers, accounting for almost half of all commercial property sales in the first half of 2022. Commercial property is generally rented, making this segment a significant investment market in the country. Properties can be purchased with tenants and leases already present. In the first half of 2021, most purchasers of commercial property were investors. While most of this investment was from local buyers, overseas investors also made a significant contribution.
Housing affordabilityHousing affordability has been an important issue across New Zealand for many years, with the country having one of the highest house price-to-income ratios in the world. With house prices rising disproportionally compared to incomes, New Zealand has been stuck in a property bubble. For the first time in years, the real house price index and the house price to income ratio in New Zealand fell in the first quarter of 2022, continuing into the second quarter. Additionally, annual median house prices dropped across the majority of regions in December 2022 from the same month of the previous year, with the Wellington region witnessing the largest change in its house price index in January 2023 from January 2022 figures. Nonetheless, New Zealand’s house price index remained high in comparison to the same quarter of the previous year and house prices stayed largely disproportional to income.
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 profits 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.