Property Investment
11 min read
Author: Andrew Nicol
Managing Director, 20+ Years' Experience Investing In Property, Author & Host
Reviewed by: Ed McKnight
Resident Economist, with a GradDipEcon and over five years at Opes Partners, is a trusted contributor to NZ Property Investor, Informed Investor, Stuff, Business Desk, and OneRoof.
Property investment can be a powerful way to build long-term wealth.
But it’s not risk-free.
If you invest in property for long enough, it’s likely that something will go wrong at some point.
That’s not to scare you off investing. I’m saying this so if you choose to invest in property … you’re going it with your eyes wide open.
In this article, you’ll learn the 12 most common risks New Zealand property investors face. That’s for whether you’re renovating, buying existing property, or investing in New Builds.
And more importantly, you’ll learn what you can do to address those risks.
Just keep in mind, these aren’t the only risks you might face as an investor. But, after working with hundreds of property investors over the years, these are the ones I get asked about most often.
Property investment isn’t about avoiding risk. It’s about understanding the risks upfront and building a strategy that can handle them.
Over the long term, property prices tend to rise.
But, they don’t go up a neat 5% or 6% every year. Prices rise and fall based on a range of factors. That includes interest rates, lending rules, the economy ... and what’s happening in your local market.
And just because house prices might have gone up last year … that doesn’t mean it’ll happen again the next year. The same way a bad year, doesn’t guarantee the next one will be doom and gloom either.
As an example, house prices jumped around 30% between November 2020 and November 2021.
But they then fell around 18% over the next 18 months as interest rates rose.
Now, if you bought a property near the peak and sold in the downturn, that could put you in a tough financial position.
That’s why to reduce the risk, many investors hold their properties for the long term. That’s because, as time goes on, the ups and downs start to even out.
Let’s say you bought an investment property at the worst time since 1992, and held for a year. In the worst ever single year, NZ property prices declined 14.2%.
So a single year can be very bad.
But even in the worst ever 10-year period, property prices still increased 4.6% per year (on average).
That’s why at Opes Partners we often suggest holding an investment property for 10 years or more.
How to reduce this risk:
Sometimes the biggest risk isn’t the market, it’s the physical building itself.
This showed up a lot with homes built or renovated in the 1990s and early 2000s, when “leaky building” problems were common.
Often, owners didn’t find out until years later, when water damage and rot became obvious.
What looked like a good investment then turned into a huge unexpected repair bill. And some owners found banks found they couldn’t borrow more against these properties, and getting insurance became harder.
How to reduce this risk:
Even a good property can underperform if the area goes backwards.
This can happen in small towns that rely on one big employer. Some small towns rely on a single employer. It could be a meatworks, a sawmill, a forestry plant, or a major tourism draw like a ski field.
If that employer shuts or cuts staff, people often move away to find work. Fewer people move in. That can weaken demand for rental properties and make it harder to find tenants. It can also slow house price growth, according to a paper published in the Journal of Rural Studies.
For example, when Silver Fern Farms closed its Fairton meatworks in 2017, about 370 workers lost their jobs.
And in Ohakune, Winstone Pulp International shut two local mills in 2024, with about 230 jobs lost.
Around the same time, tourism took a hit. The infamous Chateau Tongariro closed in 2023 after 100 years, because of tougher ski seasons.
All of these business closures could have a major impact on your investment property (if you bought in those smaller towns).
How to reduce this risk:
Tax rules for property investors are complicated. And they’re changing all the time.
So what was a good idea 5 years ago might not work today.
Interest deductibility is the clearest recent example.
This is where the Labour-led government changed how property investors’ profits were calculated. Property investors couldn’t count their mortgage interest costs when calculating their tax.
That made your property look way more profitable (even though it wasn’t). So, you paid way more tax.
Imagine being taxed like you don’t have a mortgage … but you actually do have one.
These rules changed back after the 2024 election. But, it’s a good example of how tax rules can change and impact the cashflow of your investment property.
How to reduce this risk:
Like tax, property is heavily regulated, and the rules can change quickly.
The Credit Contracts and Consumer Finance Act (CCCFA) is the law that governs how banks lend out money. So, these rules impact who gets a mortgage and who doesn’t.
Do you remember the CCCFA changes in 2021? That’s when your mortgage could be declined for a Kmart trip, your Netflix subscription or your daily coffee.
Some mortgage advisers called the rules “extreme”.
Admittedly, those rules have changed back. But at the time it meant that it became difficult to borrow money, for instance if you wanted to borrow to renovate your property.
Similarly, the previous government brought in the Healthy Homes Standards. These meant that some investors had to spend thousands of dollars upgrading their properties.
This shows that the regulations can change. These can introduce new costs or extra form-filling and compliance tasks.
How to reduce this risk:
Interest rates move in cycles, just like property markets. And of course, higher rates increase mortgage costs. If you have a mortgage, that can mean lower cashflow.
During the COVID boom in 2020/21, many investors fixed their mortgages at around 2.5 – 3%. When those loans came up for refixing in 2023 or 2024, rates were often closer to 6 – 7%.
On a $700,000 mortgage, that change alone could add tens of thousands of dollars per year in interest. It's enough to turn a property that’s making cashflow – into one that requires a weekly top-up.
As well as impacting your cashflow, these changing interest rates can also impact your property’s value.
How to reduce this risk:
As mentioned before, holding on to a property over the long term can mean that you make money, even if your investment temporarily goes down in value.
But what if the cashflow changes, you can’t afford the mortgage, and have to sell the property early? That could mean you potentially lose tens of thousands of dollars.
As interest rates fell through much of 2016–2021, some investors grew their portfolios faster than they otherwise could have.
But as interest rates rose from 2021, higher repayments put the pressure on. Then, on top of that, property values dropped.
That meant some investors were forced to sell those properties to pay off the mortgage. But, that could mean making a loss.
How to reduce this risk:
Owning a property comes with ongoing costs that usually rise over time. These include your local council rates, maintenance, insurance and many more.
These costs can jump. For instance, council rates jumped sharply in recent years.
Stats NZ shows local authority rates and payments were up 12.2% in the year to September 2024. Some councils forced the average ratepayer to swallow double-digit increases in a single year.
For example, RNZ reported that South Wairarapa’s rates rose 138% between 2015 – 2025. That meant they more than doubled in just a decade.
If you don’t plan for these increases, they can quietly erode your cash flow over time. And, as mentioned before, that could mean you’re forced to sell the property early.
How to reduce this risk:
Property investors needs tenants to pay the rent. Otherwise, the property investor has to cover all the costs themselves.
But what happens if you can’t find a tenant? That’s called vacancy.
Most investors will typically budget for 2–6 weeks of vacancy per year when running their cash flow.
But in real life, some properties rent faster, and others can take longer.
In parts of 2024, some landlords experienced longer vacancy periods. That’s because the rental market was weaker.
Even if you find a tenant quickly, you don’t get paid rent until they move in. And a tenant might not move in straight away.
How to reduce this risk:
Similarly, what if the tenant you do find … doesn’t look after the property well? Or, what if they don’t pay their rent on time?
A bad tenant is one of the biggest fears for property investors.
From my team’s experience at Opes Property Management, the majority of tenancies run smoothly. But, bad tenants do exist.
These can include tenants who pay rent late (or not at all), cause damage, or disturb the neighbours. When this happens, it can have a real financial impact through lost rent, legal costs, and repairs.
Now, most investors will tell you that the majority of tenants mostly-fine and problem free. But statistically, you have roughly a 1-in-20 chance of heading to the Tenancy Tribunal in a year.
How to reduce this risk:
Unlike shares, property is illiquid. You can’t sell instantly if you need to ...your money is all locked up until you find a buyer and they pay, which is often 4 weeks later.
So, investors who needed to sell during the 2022–2023 market slowdown often struggled to do so in a hurry.
And some had to accept lower prices due to that time pressure.
Whereas when it's a hot market, like in the boom years of 2020–2021, properties sell much more quickly.
How to reduce this risk:
Natural disasters can take everyone by surprise. No one could have predicted the Christchurch earthquakes, or Auckland’s flooding events in 2023.
If your property gets damaged, the value could go down. It could require expensive repairs. Or, the property might not be habitable. That can mean no tenants and no rent for a period.
Damage isn't the only issue. Insurance costs can jump up afterwards. RBNZ said the cost to insurance a dwelling went by 25% in 2024.
Insurers are also pricing more based on flood and earthquake risk. Now, high-flood-risk homes can face much higher premiums.
And even with insurance, investors can still face delays and gaps.
Over 8,000 claims for the Auckland floods were still outstanding almost a year after being lodged, news reported at the time.
How to reduce this risk:
Phew, I get it… that’s a long list of risks, and it can feel overwhelming.
But while something may go wrong, it’s highly unlikely everything will go wrong all at once.
Most investors run into trouble not because risks exist, but because they didn’t think about them upfront.
Property investment isn’t about avoiding risk altogether. It’s about understanding it, pricing it in, and managing it.
If you take a long-term view, stress-test your strategy, and build in buffers, property can still be a powerful way to build wealth ... even when things don’t go perfectly.
Managing Director, 20+ Years' Experience Investing In Property, Author & Host
Andrew Nicol, Managing Director at Opes Partners, is a seasoned financial adviser and property investment expert with 20+ years of experience. With 40 investment properties, he hosts the Property Academy Podcast, co-authored 'Wealth Plan' with Ed Mcknight, and has helped 1,894 Kiwis achieve financial security through property investment.
This article is for your general information. It’s not financial advice. See here for details about our Financial Advice Provider Disclosure. So Opes isn’t telling you what to do with your own money.
We’ve made every effort to make sure the information is accurate. But we occasionally get the odd fact wrong. Make sure you do your own research or talk to a financial adviser before making any investment decisions.
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