The property market has seen declines over the last few years. There are signs that the worst has past and there are positive times ahead. Yet, in the winter of 2025, many Kiwis remain hesitant. What’s stopping them? More importantly, how can these barriers be addressed? Below, we explore the key challenges and offer actionable solutions for potential investors considering this path.
1. High Interest Rates Are Freezing Buyer Enthusiasm
One of the most significant barriers is the ongoing challenge of interest rates. After years of historically low rates, the Reserve Bank’s efforts to curb inflation led to sharp increases. Even though interest rates are on the way down, investors are still cautious about interest rates and costs.
Solution:
To counter the sting of high interest rates, savvy investors can look at restructuring their finances. Fixing mortgage rates for longer terms while interest rates are still rising can help mitigate future uncertainty. Additionally, consider properties with lower purchase prices or higher rental potential - suburbs with a growing population or future transport links are often worth exploring. Partnering with a financial adviser to map out a long-term strategy can also provide clarity and confidence in decision-making.
2. Stringent Lending Criteria
Banks in 2025 have continued to enforce tighter restrictions on lending. With higher deposits required and stricter income-to-debt thresholds, getting the green light for a loan has proved challenging for many would-be investors.
Solution:
If traditional lending requirements feel out of reach, alternative financing options can be the answer. Another strategy is consolidating existing debt. It’s also worth exploring government grants or incentives tied to new builds, which sometimes offer deposit assistance programs.
3. Uncertainty Around Government Policies
Government policies, like changes to interest deductibility rules, continue to cast a shadow over the appeal of investment properties. While new builds currently enjoy exemptions from certain regulations, many investors remain cautious, fearing future rules could erode potential profits.
Solution:
Staying informed and planning for adaptability is key. Investors should pay close attention to updates in government policies and how they specifically affect new builds versus existing properties. Working with a specialist property accountant or financial advisor who understands the intricacies of New Zealand’s property laws can help protect your investment and keep it aligned with ongoing changes.
4. Economic Uncertainty & Rising Costs
With the cost of living rising and economic conditions tightening for many households, the general appetite for major financial commitments like property investment has waned. Additionally, increases in construction costs have left some new developments priced out of reach for everyday investors.
Solution:
Focusing on affordability and smart budgeting is essential. Investors should look beyond glamour brands or central hubs and explore emerging markets or overlooked areas where prices are more competitive. Negotiating for better terms - such as extras (like landscaping and appliances) - can also stretch dollars further. Pair this with a realistic projection of holding costs to prevent being caught off guard.
5. Perception of Market Risks
Many Kiwis remain cautious due to fluctuating property values in recent years. Questions around whether the market has reached the bottom or if it may drop futher, coupled with fears of overpaying, have driven hesitation among even experienced investors.
Solution:
Understanding the long-term nature of property investment is critical here. While market values may ebb and flow, history shows real estate remains one of the most reliable ways to build wealth over time. Conducting due diligence - researching local demand, vacancy rates, and future growth potential - reduces risk. Additionally, diversifying investments to include different property types or markets can create balance and stability.
6. Concerns About Rental Market Challenges
Some investors worry about the current state of the rental market. Increased scrutiny on landlords, alongside challenges in finding reliable tenants, has led to hesitancy toward taking on investment properties.
Solution:
Investors should approach the rental market proactively. Carefully choosing locations with strong tenant demand - such as areas near universities, hospitals, or transport hubs - can make finding reliable tenants easier. Additionally, partnering with a property management company can alleviate much of the stress associated with tenant issues, leaving landlords free to focus on their broader investment strategy.
Key Takeaways
The winter of 2025 may be casting a chill over the New Zealand property market, but for those willing to overcome the barriers, opportunity abounds. By addressing high interest rates through smart financing, staying abreast of policy changes, and finding ways to reduce costs, Kiwi investors can still thrive in today’s climate. New builds, with their modern appeal and regulatory advantages, remain a promising option for those looking to future-proof their portfolios. Take the time to research, seek expert advice, and make calculated decisions - because a cooler market often hides opportunities waiting to heat up.
Ready to turn investment barriers into opportunities?
Discuss your strategy for navigating the new build market with Hamish Cowan, Founder and Director at Equiti. Book your complimentary 15-minute phone call today.