29/10/2026
Most of the Covid housing bubble has now deflated. With voting under way, Owen looks at which housing policies actually fit the economics, and what it means for first home buyers and first-rung investors.
If you're waiting for house prices to fall off a cliff before you buy your first home, ANZ has some slightly inconvenient news. If you're waiting for them to take off again and deliver the capital gains we became used to, there's inconvenient news there too.
ANZ's latest Property Focus asks a good question: are house prices finally back where the economic fundamentals say they should be? The short answer is nearly.
With voting already under way, that raises a second question. Which parties are proposing housing policy that fits those economics?
First, a reality check
The Covid boom was extraordinary, and so was the correction. Average prices are about 16% below their 2021 peak, and more than 30% lower once inflation is taken into account.
One number tells the story. The house-price-to-income ratio sat around four before 2002 and peaked at nearly nine in 2021. It is now around six. ANZ's best guess is that it settles somewhere between five and six over the long term. In other words, most of the Covid excess has gone.
ANZ tested prices against four measures of fundamentals. Three still say prices are a touch high, mainly because long-term interest rates are higher than they were five to ten years ago. The bank now expects prices to finish 2026 about 2% lower and ease another 1% in 2027, before a gradual recovery from late 2027.
The more telling measure is the gap between what a house costs to buy and what it costs to build. That gap has fallen from around 2.1 in 2021 to about 1.54, close to its previous low of around 1.4. You can't keep making existing houses cheaper than new ones without killing the incentive to build. Houses are expensive to build, and eventually that matters. It's why ANZ thinks the remaining downside is limited.
So let's apply that test to the politicians.
Labour: make property a little less irresistible
Labour's big property policy is a 28% capital gains tax on gains made after 1 July 2027 on residential investment and commercial property. The family home, farms, KiwiSaver and business assets are exempt.
That draws a sharp line depending on which rung of the ladder you're on. A first home buyer living in the house? Exempt. A first home buyer thinking about starting a rental portfolio? That’s a different conversation.
Labour argues the tax system shouldn't steer money into property at the expense of productive business. And there's an argument this fits part of ANZ's picture. If prices are already near fundamentals and higher interest rates are capping growth, making future gains less tax-attractive could further cool investor demand. For a first home buyer bidding against investors, that could matter.
The catch is that a capital gains tax doesn't pour a slab. It doesn't release a section or connect a subdivision to the sewer. It changes the investment equation, not the cost of producing the next house.
National: don't change the buyer, change the market
As the government, National's Going for Housing Growth programme is already under way. It requires councils to zone for decades of future demand, opens up new ways to fund infrastructure, and rewards councils that deliver housing growth.
It isn't exciting policy. Nobody has ever dominated a dinner party talking about infrastructure funding tools. But if land, infrastructure and building costs set the price of the next house, easing those constraints attacks affordability at its source. It also avoids a classic trap of housing policy: giving buyers more money to compete for the same number of houses.
ACT: similar medicine, stronger dose
ACT starts in much the same place as National on planning and building reform, then turns the dial further towards the market. For investors there's another dimension. ACT wants to remove rental loss ring-fencing, so that future rental losses can be offset against other taxable income.
If you're weighing up your first rental, you'll probably like the sound of that. But the economics are more nuanced. Making it cheaper to create housing attacks supply. Making it more attractive to buy housing that already exists can lift demand. Those aren't the same thing.
The Greens: build more, intervene more
The Greens promise tens of thousands of new public homes, a 2% cap on annual rent increases, a national landlord register, and reversing full interest deductibility for rental property.
Public housing is still housing supply. Whether the Crown or a developer owns the finished home, another dwelling exists. Rent caps are a different matter. ANZ's analysis doesn't suggest they lower the cost of land, infrastructure or construction. The Greens are answering legitimate housing questions, just not the particular question ANZ is asking.
New Zealand First: don't forget the pipes
New Zealand First has proposed a Future Fund of up to $100 billion for long-term infrastructure. That speaks to something easily forgotten when politicians talk about building more houses. Land without roads, water and wastewater isn't housing supply. It's just land.
The open question is how directly that money would turn into new housing capacity. The detail so far doesn't answer it.
So how do they stack up?
Measured against ANZ's diagnosis, the policies that fit most neatly are the ones that lower the cost of producing housing: more zoned land, infrastructure that keeps pace, and fewer barriers to building. National, ACT and New Zealand First all lean that way, ACT with more generosity towards investors.
Labour comes at it from almost the opposite direction, by reducing the tax appeal of property as an investment. The Greens combine new public supply with direct intervention in rents. One approach attacks supply constraints. The other tries to change investment incentives and, potentially, demand.
If you're a first home buyer, you might reasonably want both. More houses, cheaper land, better infrastructure and lower building barriers. And perhaps fewer people bidding against you because property is the obvious tax-preferred investment. How you weigh it up at the ballot box is your call.
So should I buy a house (note: this is not investment advice!)?
If ANZ is broadly right, trying to pick the exact bottom of the market is a mug's game. Prices have already come a long way back towards fundamentals, and the remaining downside looks limited.
That doesn't mean rushing out this week to buy whatever's at auction. It means the equation is getting more boring, and boring might be healthy.
For a first home buyer, the questions become:
Can we comfortably service the mortgage?
What happens if interest rates don't fall as far as we hope?
Are we buying the right house, or just a house?
Can we hold it long enough that next year's price barely matters?
For a first-rung investor, I'd add:
What's the real yield?
What does it look like after rates, insurance, maintenance and interest?
Does it still stack up without big capital gains?
What happens if the tax rules change?
For years, New Zealand property made mediocre decisions look clever because capital growth eventually came to the rescue. The next cycle may be less forgiving. Cashflow will matter. Price will matter. Buying the right property will matter more than simply owning one.
Frankly, that wouldn't be such a bad thing. And it's exactly why getting the right advice before you sign matters more now than it has for a decade. [Home Run call to action and link]
This article is commentary on housing economics and announced political policy. It isn't financial, investment or political advice.
