Can house prices return to growth? How could New Zealand parties’ election housing policies change home buying and development?

Lower deposits, changes to property taxes, limits on rent increases, simpler development approvals… New Zealand parties’ housing policies may appear to target buyers, landlords and tenants separately, but ultimately they all relate to the same question: can homes be bought, built and held over the long term at an affordable cost?

For the property and construction sectors, the value of policy lies not only in whether it can stimulate sales, but also in whether it can improve financing conditions, reduce barriers to development and translate into actual housing supply.

If long-term house price growth moderates, project viability will depend more heavily on reasonable costs, stable funding and real demand for homes to live in.

1. As house price growth slows, what does the market need to recalculate?

According to reports published by NZ Herald and The Post on 15 October, Cotality’s chief property economist for New Zealand, Kelvin Davidson, noted that the national median residential property value remained about 19% below its 2021–2022 peak, but was up 37% since September 2016, equivalent to compound annual growth of about 3.2%.

He suggested that if the link between house prices and household incomes strengthens, the long-term growth trend could shift from the historical range of 6% to 7% towards something closer to 3% to 5%.

This is a conditional assessment. It does not mean house prices will not rebound, nor is it a forecast of short-term movements. It raises a question: are past expectations of continued capital growth still a suitable basis for future home purchases and development?

Buyers need to consider whether their income can cover mortgage repayments; landlords need to calculate how much rent remains after interest, taxes, charges and maintenance; and developers need to assess whether sales revenue can cover land, construction, financing and supporting infrastructure costs.

From an industry perspective, if the scope for capital growth moderates, there may be less room to absorb cost overruns through future price rises, making project budgets, product positioning and delivery efficiency all the more important.

2. Whose costs do different housing policies actually change?

The parties’ policies act at different points. Lower deposits change the cash needed to enter the market; tax and tenancy rules affect returns during ownership; and public housing and development support influence the scale of supply and project funding.

National proposes raising the First Home Loan income cap to NZ$300,000, expanding access to low-deposit lending support. For households whose incomes can support repayments but whose savings are insufficient, this could reduce the deposit hurdle. However, borrowing more also means a greater mortgage burden.

If purchasing power expands without a corresponding increase in homes within buyers’ budgets, the effect on affordability remains to be seen. For developers, whether newly eligible buyers translate into actual sales also depends on loan approvals, sale prices and housing types aligning.

On tax, Labour proposes a 28% capital gains tax on gains accruing after July 2027 and realised on sale, for residential and commercial properties other than the family home, while retaining interest deductibility for landlords. Capital gains tax concerns gains on sale, while interest deductibility affects taxable income during ownership; the two should not be conflated.

ACT advocates removing rental loss ring-fencing, allowing qualifying residential rental tax losses to be offset against other taxable income, such as wages. This could improve tax-related cash flow for some landlords, but would not directly eliminate property operating losses.

The Green Party proposes limiting rent increases to the lower of inflation and average wage growth. Te Pāti Māori advocates an initial rent freeze, followed by adjustments generally in line with inflation, and also proposes a vacancy tax and the removal of interest deductibility.

These proposals would change costs and protections for different groups, but their ultimate effects on rents, investor demand and supply would still depend on policy details and regional supply and demand.

3. For the development and construction sectors, the key is whether projects can proceed

Can infrastructure and funding keep pace with faster approvals?

The Opportunities Party proposes 10 nationally standardised planning zones and a national pre-approval system for proven building products, off-site manufacturing and modular prefabricated systems to reduce duplicate assessments.

Measures of this kind could shorten preliminary processes and reduce the capital tied up during waiting periods, but faster approvals cannot automatically resolve inadequate road or water infrastructure capacity, or a shortage of development finance.

New Zealand First would require fast-track housing projects to identify the infrastructure they need and explain how its delivery is being addressed. Its policy announcement on 14 October emphasised that residential development should receive the necessary supporting infrastructure, rather than pursuing housing numbers while overlooking the capacity to accommodate them.

For projects, what needs to be clear is who will build the infrastructure, who will pay for it and when it can be delivered. Clear responsibilities help developers plan the pace of development; if funding and timelines remain uncertain, even approved projects may struggle to reach the construction stage.

Can public housing commitments create a stable construction programme?

Labour, the Green Party and Te Pāti Māori all propose different forms of public or social housing expansion. The Opportunities Party advocates low-cost government development finance to deliver affordable or social housing projects that meet local needs.

For construction businesses, potential opportunities need to be assessed against project locations, procurement arrangements, payment terms and construction schedules. For building material suppliers, clear and sustained procurement demand makes it easier to plan inventory, equipment and production capacity.

Housing commitments therefore need to be assessed not only by the numbers, but also by whether land, design, financing and construction can be coordinated. A stable project programme helps businesses plan staffing and investment more effectively than sporadic target announcements.

How could energy-efficiency policies change housing design and demand for materials?

Labour and National have each proposed home energy support schemes covering measures such as solar power and insulation. The Opportunities Party advocates expanding the scope of home retrofits and requiring new homes to be pre-wired for solar power and electric vehicle charging.

These policy directions could drive demand for insulation, glazing, electrical products and energy equipment, while also making coordination at the design stage more important.

However, adding features could increase upfront investment. Whether this delivers reasonable long-term savings needs to be assessed against equipment prices, financing costs, maintenance requirements and actual use. For the industry, providing verifiable performance data and whole-of-life cost information is more meaningful than simply adding product features.

YIJU perspective | The value of policy ultimately lies in the capacity to deliver homes

In the next phase of New Zealand’s housing market, the question worth watching may be not just how much house prices can rise, but whether homes can be developed, built and held over the long term at a reasonable cost.

Although political parties differ in their policy directions, what the property and construction sectors really need to watch is how policies affect land development, financing, infrastructure investment and the capacity to deliver homes.

Lowering barriers to home buying can help some households enter the market, but more lasting improvements in housing affordability will only be possible if housing supply, construction efficiency and purchasing power improve together.

For developers, construction businesses and building material suppliers, what warrants continued attention is not only the election result, but also whether policies can translate into actual projects, investment confidence and sustainable market demand.