New Zealand house prices are over 160% higher now than in 2011. Yep, that’s a real number. Let that sink in for a minute.

Mix that in with rising interest rates, tax changes starting to bite and new stricter landlord regulations, and all of a not-so-sudden residential property doesn’t quite have the lure of yesteryear. In fact, a survey from retail investment company Sharesies indicates that there may be almost half a million Kiwis who aren’t looking to buy a house, with as many as 300,000 reaching that decision in the past year alone.

Let’s face it – as a nation, we’ve historically been obsessed with home ownership. The love affair between Kiwis and the quarter-acre dream has only become more fervent in the last few years as remote work becomes more common, opening up the regions to those who may have only considered larger centres previously.

“The social norms are, as a good Kiwi, you should own your own house. It’s a cultural phenomenon which will take a long time to change,” says Massey University senior lecturer, Dr Alexandra Ganglmair-Wooliscroft.

With residential ownership so imprinted in our cultural identity, you’ve got to marvel at the circumstances that are not only removing people’s ability to buy homes – but also their desire to do so.

For your average punter, buying a house holds less and less appeal. First there’s the rising price, which can’t be ignored. According to data from the Real Estate Institute of New Zealand, the October median house price in Havelock is now $1.23M. Last year in the same month it was $850,000.

In September, the median was $1.225M. To put this in perspective, that’s an increase of $5,500 in one month. The average median wage in New Zealand as of mid-2021 is $4,372 per month. And that’s not even the most dramatic jump of the year… from August-September, the median for Havelock North increased by a whopping $95k from August’s $1.13M, or near on double the average yearly wage.  

Even traditionally lower priced areas like the Central Hawke’s Bay have seen a price hike, sitting currently at a median of $650,000 (up from $465,000 same time last year).

Just this week the Reserve Bank again raised the cash rate by 0.25 per cent to be 0.75 per cent. It was only last month that the OCR was raised for the first time in seven years – and it is expected there is more to come. One scary headline called attention to the fact we’re seeing that fastest rising mortgage interest rates in 15 years.

There’s not a lot of sympathy for first home buyers from RBNZ either, with boss Adrian Orr advising mortgage rate shocks are “part of the real world.”

This may have some buyers feeling like the old tale of the frog in the pot. When they jumped in it was fine, but now the situation’s starting to make them sweat.

So, buying it to live in is increasingly difficult. What about buying it as an investment, to rent out?

Since March the gloss has come off that as well. With the full removal of interest deductibility from investment properties, investors can’t offset the cost of the interest they pay on their mortgage against their tax bill. So while bigger players may be able to factor this in as part of the overall investment cost, the mum-and-dad investors will definitely feel the sting. Even offloading these investment properties will hit sellers in the pocket, with more tax on money made from a property transaction part of 2021’s property bright-line extension.

According to Revenue Minister David Parker; “The bright-line extension is one measure designed to dampen investor demand alongside the proposals to limit interest deductions for investing in residential property.”

Of course, this has led to some investors offloading older properties and making moves to commercial properties and new builds.

On the flip side, it looks like some major developers are looking into build-to-rent as rent prices continue increasing. Kiwi Property Group (the guys behind shopping centres like LynnMall, Sylvia Park in Auckland and The Base in Hamilton) has announced they intend to develop two large apartment complexes in Auckland, which are tipped to be residential rentals. This is unusual for a corporate investor because typically they tend to avoid taking on long term holdings in the residential market, when they can usually get better returns from corporate investments like shops and warehouses.

We’ve also got a small trend of the mum-and-dad investors who might usually go into residential, going into commercial property. The latest Tony Alexander portfolio investment survey indicates that, while still not the norm, some investors who are no longer going into residential property are investing in things like “shares, commercial property, crypto assets and precious metals.”

As financial experts, we bang on about diversification a lot. There’s a reason for that. It helps manage risk to not have all your eggs in one basket, because if one fails – or if laws change, as they have this year – you’re not completely beholden to it.

We admit to having no idea in the short term where any market will go, the property market included and that anyone who professes to know, is just another day closer to being made a fool. Property is a necessity because we all need to put a roof over our head. But trying to get rich putting a roof over someone else's head? That's not for everyone. It's best to weigh the downside risks first before buying into the hype and excitement that fills our property obsessed nation.

• Nick Stewart is a Financial Adviser and CEO at Stewart Group, a Hawke's Bay-based CEFEX certified financial planning and advisory firm. Stewart Group provides personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from an Authorised Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz