New IRD data shows most property investors are barely breaking even – or losing money
More than 50,000 New Zealand property investors are running their portfolios at a loss, while even those recording profits are seeing modest gains, new government data shows.
In the 2024 tax year, the average profit reported across all entities was just $15,680 – translating to a yield of only 1.7% based on average property values.
“People are not investing in property for cash yields but for other reasons,” Simplicity chief economist Shamubeel Eaqub told RNZ. “The real motivation is capital gains – because the cash return means tenants aren’t the main business, the house is.”
Recent Cotality data suggests that “mum and dad” investors are cautiously returning to the market, favouring cheaper, existing homes with improved cashflow. The share of mortgaged investors purchasing in the lowest 30% of property values has risen to 24%, while average mortgage top-ups have halved over the past year – from $400-$500 a week to around $200 – broadening the appeal of rental property investment.
Average profits fall, losses dominate
Under the Official Information Act, the Inland Revenue Department (IRD) released data showing:
- Individuals earned an average rental profit of $13,240
- Trusts fared slightly better, with an average profit of $26,490
- The 2023 and 2024 years recorded average total losses of nearly $85,000 and $21,362 respectively when capital gains were considered
Returns had been positive in prior years – investors earned an estimated $179,672 in 2022 and $111,464 in 2021 when capital gains were high. But the downturn in values has flipped many portfolios into the red.
‘Topping up $300 a week’ to cover losses
Matt Ball, spokesperson for the NZ Property Investors Federation, said the figures were unsurprising.
“We have one rental property ourselves and I’m putting in $300 a week at the moment because I’m stuck on an interest rate of 6.65%,” he said. “We'll make a loss just because that’s how it is.”
Ball said that many investors work hard to make their properties cashflow positive, often by upgrading or adding bedrooms.
“It’s hard work... you can’t just buy a place and sit down and watch the money roll in.”
Most property investors hold other jobs
Ball noted that 85% of investors have another job to help support their property portfolios.
“I think if you could put the money into other investments, you’d probably be getting a strong income… the leverage is the difference, I can't borrow $1 million to put into shares,” he told RNZ.
Tax treatment distorting the figures?
Sarina Gibbon, Auckland Property Investors Association general manager, said some profit data is misleading due to recent tax policy.
“Since FY22, when interest deductibility started being phased out, the IRD hasn’t been privy to the economic reality of investing, let alone reporting it accurately. It has been reporting legislated distortion,” Gibbon told the news agency.
“In FY24, landlords could only deduct 50% of interest costs... so, no, the numbers are not surprisingly low; they are deceptively high. We are taxing revenue, not profit.”
She said this tax distortion had an unintended effect: “It did rewire investor behaviour from accumulating to improving… better-quality housing, but also higher rents.”
Outlook for advisers: Breathing room returns
Now that interest deductibility is being restored and interest rates are easing, Gibbon said conditions should start improving for investors.
“In the long term, I expect investment to be more dynamic, yield-focused and taxable income from the investor cohort to grow.”
More experienced investors fare better
Property coach Steve Goodey added that investors starting out are more likely to record losses.
“But people who have been investing for a while would often have properties without mortgages,” Goodey said – meaning stronger long-term gains and better cashflow positions.
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