31 Oct 2025
The Wellington property market is entering a new chapter in 2025. With major housing and tax reforms reshaping investor sentiment, lending rules, and affordability, homeowners and buyers alike are asking: What does this all mean for Wellington? Let’s unpack the big changes and what they could mean for you.
Both national reforms and wider economic forces are shaping New Zealand’s property market in 2025. Before diving into Wellington, it helps to understand the broader policy landscape.
One of the biggest changes this year is the full reinstatement of interest deductibility for investment properties. Interest deductibility is 80% for 1 Apr 2024–31 Mar 2025, and 100% from 1 Apr 2025 (interest limitation rules repealed). Ring-fencing continues to apply. This reverses the previous interest limitation rules that restricted investors from claiming mortgage interest as a business expense.
For Wellington investors, this reform can significantly improve cash flow and post-tax returns. However, loss ring-fencing remains in place, meaning you can’t offset property losses against other income. The bottom line? It’s a win for long-term investors, but strategy still matters. (The example cashflow uplift of $4,500–$5,000 per year is illustrative only.)
On 8 October 2025, the Reserve Bank of New Zealand (RBNZ) cut the Official Cash Rate (OCR) by 50 basis points to 2.5%, signalling it is open to further reductions if the economy requires (RBNZ Monetary Policy Statement). The move aims to support growth amid a softer economy and cooling inflation.
However, new data from RBNZ October 2025 shows annual inflation rising to 3.0%, up from 2.7% — the highest since June 2024. The lift was driven by higher food, electricity, and local rates, partially offset by lower petrol, pharmaceutical, and telecom equipment prices. Underlying inflation sits closer to 2.5%, suggesting the RBNZ still has scope for further easing if growth weakens. This dynamic highlights how monetary and price trends remain finely balanced heading into 2026.
Mortgage rates generally follow wholesale trends, so cuts are feeding through gradually to retail lending — lifting buyer sentiment across Wellington.
The loan-to-value ratio (LVR) restrictions remain an important tool for financial stability (RBNZ LVR Framework). On 14 October 2025, the RBNZ announced that from 1 December 2025, lending caps will ease — allowing banks to issue up to 25% of new owner-occupier loans above 80% LVR, and up to 10% of new investor loans above 70% LVR.
In addition, debt-to-income (DTI) restrictions have applied since 1 July 2024, limiting the share of new bank lending that can exceed set income multiples (RBNZ Policy Update). These remain in force through 2025.
For Wellington buyers, these changes mean access to credit is improving — especially for owner-occupiers — while maintaining safeguards against risky lending.
Zooming into Wellington, the story is one of slow stabilisation rather than sharp recovery.
As of Sept 2025, the median Wellington house price sits around $760,000, down roughly 3.2% year-on-year. Sales volumes are modestly improving, though days to sell remain longer than pre-pandemic norms. Compared to national trends, Wellington’s correction has been deeper but has been broadly bumping along the bottom for 2-3 years now.
Listings have risen, giving buyers more choice, while motivated vendors are becoming more realistic on pricing. The result? A more balanced market where affordability and negotiation power are returning to buyers.
Inner-city and coastal suburbs like Mount Victoria, Island Bay, and Miramar are showing early resilience, driven by lifestyle demand and limited supply. Outer areas such as Tawa and Upper Hutt remain more price-sensitive, reflecting commuting costs and higher mortgage exposure.
Investor yields are under pressure, with gross yields averaging 3.8–4.2%, depending on property type (Squirrel NZ data). Yet well-maintained townhouses and smaller multi-units continue to attract steady interest. For the canny investors out there, it is possible to achieve very high yields again, even in good locations, but these properties typically come with issues that need to be resolved, which all takes time, effort and usually significant capital.
When referencing “turnkey” properties, note that inclusions can vary — typically “ready-to-live” features like blinds, heat pumps, and landscaping. Buyers should confirm compliance (e.g., Code Compliance Certificate for new builds and Healthy Homes standards for rentals) before purchase.
Wellington’s market mix has shifted — first-home buyers are more active than investors, buoyed by reduced competition and clearer lending pathways. Investors, while cautious, are gradually returning thanks to tax relief. The result is a more diverse buyer base, with momentum building from both ends of the market.
So, how do these reforms translate into real-world outcomes for Wellington homeowners and investors?
The return of full interest deductibility can lift net yields by 0.3–0.6 percentage points for many landlords. For example, an investor with a $700,000 mortgage at 6.5% interest could save around $4,500–$5,000 per year in tax deductions. (This is illustrative only.)
Still, the benefit depends on how mortgage rates move. With OCR cuts already in effect, lending costs may ease further — improving cashflow and investor confidence.
Will these reforms drive Wellington property prices up? Possibly — but modestly. While improved investor sentiment could lift demand, affordability ceilings will keep growth moderate. Expect a flat to 3% uplift through late 2025 if macro conditions hold. (Caveat - these things are notoriously difficult to predict, and our crystal ball is currently quite misty!!)
In short, the policy tailwinds exist — but fundamentals like income growth and supply still set the pace.
Wellington’s affordability challenge remains real. Many households are still stretched by inflation and living costs, and supply still sitting at generally higher levels could dampen upward price pressure. External shocks — such as slower global growth or rate volatility — could also influence confidence.
Smart investors aren’t just reacting to reforms — they’re repositioning strategically.
For those with stable cashflow and long-term outlooks, buying in Wellington now offers compelling opportunities. Others may choose to hold existing assets through recovery or rebalance toward higher-yield properties. The key is aligning with your risk appetite and financing flexibility.
Explore current listings and suburb data in our Market Insights Hub.
Look for suburbs with strong rental demand and limited new supply — think Newtown, Karori, and Brooklyn, or anywhere that is fairly central, really. Townhouses and smaller multi-unit dwellings may outperform standalone homes in yield terms, while turnkey apartments (ready-to-live, compliant with Healthy Homes standards) continue to appeal to time-poor professionals.
With capital growth likely to be modest, the 2025 focus is on cashflow optimisation. Review rent levels, manage maintenance efficiently, and consider refinancing opportunities. If you’re balancing fixed and variable mortgages, stay flexible — the RBNZ’s recent cuts could change your optimal structure within months.
Every portfolio is different. From assessing suburb-level yield data to reviewing loan structures, a Lowe & Co investment agent can help tailor insights to your circumstances. Whether you’re growing or consolidating, expert guidance ensures your strategy aligns with market realities. Book a consultation to explore your options.
Can investors really revert to full interest deductions immediately in 2025?
Yes — from 1 April 2025, investors regain 100% interest deductibility on eligible properties (Inland Revenue NZ).
Does the reform guarantee property price growth in Wellington?
Not necessarily. It supports sentiment and cash flow, but price growth still depends on interest rates and buyer demand (CoreLogic NZ).
How tightly are Wellington mortgage rates linked to OCR cuts?
Fairly closely. Following the 8 Oct 2025 OCR reduction to 2.5%, banks have begun gradually lowering fixed and floating mortgage rates.
Will LVR or other credit constraints still bite in Wellington?
Somewhat. From 1 Dec 2025, banks can lend up to 25% of new owner-occupier loans above 80% LVR and 10% of investor loans above 70% LVR (RBNZ Policy Update).
What happens if I bought at the market peak — is downside risk still material?
While values have softened, Wellington’s fundamentals remain sound. Long-term investors who hold through cycles are likely to recover value as rates ease.
The October 2025 reforms and RBNZ rate cut mark a potential turning point for the Wellington property market. Tax relief and lower interest rates provide a healthier environment for investors, while affordability gains and stable lending rules give buyers renewed confidence.
Still, the outlook remains balanced — steady, not speculative. Expect gradual recovery rather than runaway growth, with strong fundamentals in suburbs that blend livability, yield, and sustainability.
If you’d like to understand how these changes affect your portfolio, talk to Lowe & Co’s expert team. Our collaborative model means you don’t just get one agent — you gain the insight of Wellington’s top-performing professionals working together to maximise your results.
Update on the New Zealand Housing Market: July 2025
Can You Use a Mortgage for Renovations?
Selling in Wellington: Suburb-by-Suburb Breakdown
© 2019 Lowe & Co. All right reserved - Licensed REAA 2008
