8 Sales Falls in a Row: Will Property Investors Return to the NZ Market?

Kelvin Davidson (00:00):
So in other words, movers aren't moving. There is still that downwards drift. As I say, we have seen eight falls in a row. Sales are still looking pretty soft; the number of sales is not terrible by past standards, but we are seeing it slide lower compared to what we thought.

Nick Goodall (00:01):
Kia ora and welcome to the New Zealand Property Market Podcast, brought to you by Cotality for the 28th of September 2026. I'm Head of Research Nick Goodall, and today I'm joined, as per usual, by our Chief Economist Kelvin Davidson. Kelvin, we got a pretty big policy announcement from the Labour Party last week, which I want to discuss shortly. But first, you took the latest Housing Chart Pack to market last week. What did you lead with for that release, and what dominated the discussions?

Kelvin Davidson (00:28):
So, really, sales volumes again. We got the August sales figures just prior to releasing the Housing Chart Pack, and they showed another fall when you look year-on-year. We have now had eight falls in a row, which is every month so far this year. Compared to where we thought sales might be at the start of the year, it is quite a bit different. The August figure was down about 12% compared to the same month last year.

Now, that decline is bigger than the falls we have seen in previous months, which have more typically been around 4% or 5%. So, a 12% drop does stick out. I do not necessarily think it is the start of a new market slump. It feels like there might be a timing issue in there, where perhaps sales that might have happened in August have just been delayed slightly. Consequently, September's numbers might not look quite as weak.

Still, it highlights the caution that is out there. Eight consecutive falls show a very cautious mood from both buyers and sellers. At the start of the year, that was more to do with economic uncertainty and the global conflict in the Middle East. More recently, there is probably an interest rate effect in play. We have had two OCR rises now, and we have had mortgage rates sneaking higher on some terms.

In the meantime, a relative lack of sales means that property listings stay fairly high. We are moving into the spring season now for new listings, so it is still a market where there is a lot of choice sitting there. Because of this, we are still seeing a subdued trend for property values as well. It is a bit of a Groundhog Day scenario with sales, listings, and values.

Within that, first-home buyers are still doing really well. We highlighted a couple of weeks ago that a lot of this weakness in transaction volumes has come from movers, and to some extent, mortgaged multiple property investors. There are those distinct stories beneath the surface.

For me, the labour market is the big thing here. Anyone looking for an emphatic turnaround in sales and property values must realise that a lot hinges on the labour market. Rises in mortgage rates certainly are not going to help, but people can generally sustain higher mortgage rates if they are getting wage growth and are confident in their job security. On current forecasts, that sharper turnaround in the labour market might not happen until the middle of next year. On the Reserve Bank’s numbers, they do not project much of a shift in the unemployment rate until we get into next year. So, we are in a holding pattern, particularly with the election coming up too. Sales still look pretty soft. The raw number of sales is not terrible by past standards, but we are seeing it slide lower compared to the growth we had anticipated at the start of the year.

Nick Goodall (03:43):
Yeah, I think that is the interesting part. The context is that we were expecting increased sales volumes, which had been rising for the last two or three years, to continue growing this year. Instead, the annual growth has turned negative, and sales volumes have been down every month so far this year.

For anyone who looks at our presentations or the Housing Chart Pack itself—and I will include the link to the Chart Pack—you will be familiar with the fact that we often report the last three months compared to the same three months of the previous year. Part of the reason we do that is to remove monthly volatility, such as how public holidays fall or when a key policy announcement occurs locally or globally. It is useful to look at that rolling three-month figure to smooth out the noise.

When we look at the last three months, sales volumes are down about 6% nationwide, and they are down across all of the main centres. The regional areas that stick out include Hamilton, which is down 14% on a rolling three-month basis. But when you look back a bit further, Hamilton's volumes had actually held up a lot better earlier in the year than other regions. We saw volumes hold up for the first four or five months of the year, so this recent drop is likely a bit of catch-up.

On the flip side, looking at the data, Tauranga is down only 1.5% over the last three months compared to the same period last year. But that is almost entirely due to the fact that there was an out-of-the-blue, exceptionally strong June figure included in this rolling three-month data. June was up 20% in Tauranga, while July and August were both down, but not enough to drag the overall average down too much. So, that local context is incredibly important.

Wellington, on the other hand, has been consistently down all year, matching the nationwide trend of dropping every single month. Auckland is pretty much the same. Even Christchurch is seeing things slow down, with sales volumes down 5.6%. So, the slowdown really is occurring across the board.

Outside of that, the buyer classification data is always included in the Chart Pack. First-home buyers continue to hold on, but movers are where we have shifted the conversation. We spoke about them last week, but since then, the Labour Party made a big announcement ruling out any future changes to mortgage interest deductibility or tax write-offs for landlords if they are re-elected. That is a pretty big policy announcement. It is significant for the principle of it, especially because the New Zealand Property Investors' Federation was very focused on this. They were looking into research regarding the unintended consequences of removing interest deductibility for investors, and the flow-on impact that might have on rental prices and tenants.

We know it was a key focus, and Labour was aware of that lobbying and ruled it out. They have taken the position that if they win and form a coalition, their plan is to introduce a more comprehensive Capital Gains Tax (CGT) to do that job instead. This means they will not double-hit investors by phasing out interest deductibility.

I do not think this announcement is necessarily going to change investor activity dramatically right now. There is still a lot of policy uncertainty locally with the election, and other taxes could still come in. Globally, the Strait of Hormuz remains closed, and it sounds like Donald Trump has denied a potential peace deal, meaning prolonged global uncertainty. The impact of no shipping through that corridor is going to take longer, and we are seeing fuel and oil prices continue to rise at the pump every day. That global situation is going to weigh on people's minds, which flows through to the housing market.

If Labour wins and brings in a Capital Gains Tax, it will have an impact, but for now, investors will feel more comfortable knowing their cash flow will not be as negatively impacted as it would have been had Labour campaigned on phasing out deductibility. However, the Green Party still wants to reverse deductibility, so if that becomes part of coalition negotiations, we could still see changes depending on what Labour is willing to compromise on. But that is how I see the policy announcement connecting to our buyer classification data. Did you want to add anything to that, Kelvin?

Kelvin Davidson (09:08):
I will mostly just reiterate those points. You have to be very conscious of future coalition negotiations. It seems clear at the moment that both major parties intend to leave interest deductibility the way it is, but coalition negotiations can change things, so that is worth keeping in mind.

Part of the justification from Labour was that they "did not want to give landlords any excuse to stick up rents." That is an interesting rhetorical line because, as we have said many times in the past, the rental market does not work in a way where if a landlord's costs go up, they can simply pass that cost directly onto the tenant. Some individual landlords might try, but the actual mechanism is more indirect.

If a landlord’s tax bill is higher and their costs have gone up, you end up with fewer landlords entering the sector. That reduces the supply of rental properties relative to demand, which is what ultimately drives rents up over time. It is a supply and demand influence, rather than a direct cost-plus pricing model. So, the economic justification they used is interesting, but the end result is the same: interest deductibility will likely be left unchanged.

I agree that it is difficult to see this creating an immediate flood of new property investment. Rents are still looking pretty subdued, economic growth is patchy, and holding costs for landlords are up significantly through council rates and home insurance. With a Capital Gains Tax still on the table under a left-leaning government, the floodgates are unlikely to open. However, we hear on the ground that deductibility was a massive consideration for many investors who were sitting back waiting to see what their cash flow would look like. It removes one major uncertainty, but significant headwinds remain.

Nick Goodall (11:28):
Absolutely. Hopefully, it allows investors to plan longer-term knowing their interest costs remain deductible. To reiterate your point on rents: rental prices are a function of tenant incomes rather than landlord costs, alongside the balance of supply and demand.

The perfect evidence of this has been the last 12 months. Landlord costs have gone up massively—rates, insurance, and mortgage interest rates have all surged. Yet, we have seen essentially zero rental growth, and in some parts of the country, rents have actually declined. That is because demand has been constrained by low household creation, net migration has moderated, and we have had relatively high levels of supply. High supply and reduced demand have kept rents flat despite surging landlord costs. That is all the evidence you need that costs are not simply passed on. But politicians are playing politics close to an election, so they will use whatever rhetoric lines up with their base.

Let's move on to the economic data. The structure of our chats has been consistent, looking at sales volumes, property values, and buyer demographics, but our economic focus is always on where the economy is heading and when we might see genuine growth. Tied to that is employment. This week, we got the New Zealand Activity Index (NZAC) for August. Could you take us through those numbers, Kelvin?

Kelvin Davidson (14:00):
The New Zealand Activity Index (NZAC) from Stats NZ was up 1.9% year-on-year in August. A 1.9% lift is not bad historically, but it is lower than what we have seen on average over the past 12 to 15 months. It highlights the continued patchiness of the recovery; it is certainly not an emphatic rebound. Retail sales are up and down, manufacturing is performing better, and services are slowly improving, but the overall picture is patchy.

We are still in a holding pattern where every bit of good news is balanced by a bit of bad news. Clear economic recovery is likely a story for next year.

In terms of the interaction with the labour market: if GDP growth for the third quarter comes in at around 0.5%, that is not too bad. But because firms hoarded labour during the down period, they will need to see sustained economic growth and profit accumulation before they start hiring again. This labour hoarding during the downturn means the hiring recovery will lag during the upturn. That is why we do not expect to see significant jobs growth until next year. We need this positive economic news to become more consistent and widespread before it translates into employment growth and feeds back into the housing market.

Nick Goodall (16:27):
It feels like small and medium enterprises are just getting on with business and trying to battle through. Despite the difficulties, Kiwi businesses are finding a way to operate rather than waiting for conditions to improve.

Population growth is also helping by creating base demand for goods and services on the ground, even if it is not highly productive growth. The Reserve Bank’s GDP nowcast is sitting at 0.6% growth for the current quarter, which is down from the 0.9% projected a few weeks ago. That lines up with what you are saying: around 0.5% or 0.6% growth for the quarter, which annualises to about 2%. That is a decent result, but not a runaway economy.

The global situation cannot be ignored. While businesses manage costs, the fact that we are paying high shipping and material costs due to the closure of the Strait of Hormuz means conditions remain tough. Furthermore, many economic forecasts do not seem to fully account for the upward drift of mortgage interest rates and the lag of how that extra debt servicing reduces disposable household income. That intended contractionary effect of monetary policy is going to weigh on revenue levels and business costs. I will remain slightly sceptical of some of the optimistic growth forecasts until we see real recovery, and much of that hope relies on the Middle East conflict resolving sooner rather than later.

Looking ahead, we have the Home Value Index out later this week. What are you expecting based on the weekly data tracking?

Kelvin Davidson (19:40):
"Groundhog Day" is the phrase that comes to mind. Looking at the weekly figures for Christchurch, Auckland, and Wellington, the same trends remain in place. It would not be a surprise to see another slight monthly fall in property values for September, perhaps around 0.3%. It is a continuation of the subdued picture. National values are likely down again, which is disappointing for some but pleasing for prospective buyers.

Nick Goodall (20:33):
Wellington and Auckland continue to slide at a faster rate, while Christchurch is holding up. We will have all the details in the release later this week.

A quick reminder for our listeners: next week's podcast will be recorded and released on Tuesday instead of Monday. We are entering the school holidays, and both of us have family leave booked over the next two weeks. I appreciate your commitment to recording the podcast on Tuesday during your holiday, Kelvin.

How are your school holidays shaping up, and do you have any sports highlights to wrap up with before we close out?

Kelvin Davidson (21:54):
I cannot believe it is school holidays again already. We are heading away next week, which will be a great break.

On the sports front, the live drama over the weekend was incredible. The NRL semi-final between the Newcastle Knights and the Penrith Panthers was epic. I am a neutral supporter, but the drama kept me on a knife-edge. Outside of that, we had the Ranfurly Shield, golf, and the Wallabies upsetting the Springboks. It is a great time to be a sports fan.

Nick Goodall (23:28):
It was a tough weekend for Northland fans, watching the Taniwha lose the Ranfurly Shield to Counties Manukau on Saturday. Northland made the most of having the Shield and got it out into the community, and I hope Counties do the same before their defence against Hawke's Bay. Northland looked a bit flat on the day; the absence of the injured Rob Rush was felt, and despite Simon Parker returning, Counties defended incredibly well. That loss means we missed out on securing a top-two NPC spot, and we face a tough away game against Southland this week.

In other sports, the Wallabies and Springboks match had an unbelievable final ten minutes with four yellow cards and disallowed tries. I also watched the All Whites beat China 2-0 before heading to bed.

The Knights' NRL victory over Penrith was an amazing underdog story. Down to 12 men in the second half, they did not concede a single point against the reigning champions. I hope they can back that performance up against the Roosters this week.

Over in the AFL, the Grand Final on Saturday afternoon was another absolute classic with the Brisbane Lions taking the win.

Kelvin Davidson (27:51):
It was an epic weekend to be an Australian sports fan, that is for sure.

Nick Goodall (28:05):
It sets up the Bledisloe Cup at Eden Park nicely in a couple of weeks, with the Wallabies showing they can match the physical game of the South Africans.

We will leave it there. Thank you for your insights as always, Kelvin. Thanks to everyone for listening, and please get in touch with any questions or feedback. My name is Nick, he's Kelvin. You've been listening to the New Zealand Property Market Podcast. Mā te wā.