About 3000 New Zealand homes a year switch from for sale to for rent as owners give up on the price

New Zealanders who cannot get the price they want for their house are quietly turning into landlords instead, and the numbers doing it are climbing again.

Figures from property data firm Cotality, reported by RNZ on Monday, show properties are being withdrawn from sale and then listed for rent within three months at a rate of about 3000 a year. That is well up on the fewer than 2000 recorded in 2023, though still short of the 5500 seen at the peak of the market in 2021.

The two spikes have very different causes. In 2021 people were choosing to become landlords. Now they are landing in it.

Cotality chief property economist Kelvin Davidson told RNZ the 2021 peak probably reflected more people thinking that being a property investor was an appealing prospect.

“I suspect more recently the upturn would have been because of developers not being able to sell at a sufficient price so renting out instead, or accidental ‘Mum and Dad’ landlords – as opposed to what might have been a conscious choice for someone to become a landlord back in 2021,” Davidson said. “This time there’s probably been some people hoping to sell, but can’t get a decent price or can’t actually get a deal at all, so are holding on to it as a rental instead.”

The backdrop is a sales market that has almost stopped moving. The Real Estate Institute of New Zealand recorded 5430 residential sales in August, down 13 percent on August last year and the sixth lowest August in 35 years of records. Sales fell 15 percent in Auckland, 19 percent in Waikato, 14 percent in the Wellington region, 10 percent in Canterbury and 24 percent in Otago. Gisborne was worst hit with a 35 percent drop.

Buyers are in no hurry and neither are sellers. New listings were down 5 percent year on year, yet there were still 32,908 properties on the market at the end of August, up 9.7 percent. Homes took a median of 51 days to sell, three days longer than a year earlier and the fourth slowest August on record.

Renting the place out looks like the obvious fix. Sarina Gibbon of Tenancy Advisory, which advises property managers, landlords and tenants, said she was meeting more people who had become landlords because their plans to sell had failed. Some could afford to hold on and wait for a better price. Others had to move for work and could not shift the house before they went.

She is not convinced it is usually a good idea. “The propensity for Kiwi investors to use their first home as a rental property is a pretty bad habit… just because it’s a great first home doesn’t mean it’s a great investment,” Gibbon said.

Her bigger worry is that people are walking into a regulated business without knowing it. Many, she said, had not given enough thought to the Residential Tenancies Act or the healthy homes rules. She described speaking to one woman who assumed that because she had been able to buy a property, it must be compliant as a rental. That woman was being taken to the Tenancy Tribunal over healthy homes breaches.

“Rental law is traditionally not taken seriously and just treated as a bit of an afterthought,” Gibbon said. “People get themselves in trouble because they don’t realise that it’s both a business undertaking and a legal undertaking.” Anyone thinking about it should work with a professional property manager, she said.

The rules are not optional and there is no grace period left. Every private rental in the country has had to meet the healthy homes standards since 1 July 2025, covering heating, insulation, ventilation, moisture and drainage, and draught stopping. A landlord who does not comply can be ordered to pay up to $7200, and tenants can take the matter to the Tenancy Tribunal themselves. A family home that was perfectly comfortable to live in can still fail, most often on a fixed living room heater or on insulation.

The money does not always stack up either. Infometrics managing director Gareth Kiernan said a house that was never bought as an investment will often not earn the yield of one that was.

“Generally speaking, investors tend to concentrate their purchases down towards the lower quarter of the property spectrum, whereas owner-occupier is median or higher,” Kiernan said. A tenant will pay a bit more for a nicer two or three bedroom house, he said, but not enough to match what the place is worth.

He still thought it beat the alternative for some owners. “But obviously if they are worried about selling it and making a loss then perhaps having it tenanted and achieving some sort of return is a preferable outcome. A good second best outcome,” Kiernan said.

Rents are not doing much to help. The average asking rent nationally was $637 a week in August, up 1.5 percent on a year earlier, with rents actually falling in five regions. Auckland, by far the largest rental market, moved just $5 a week. Against a national median sale price of $750,000, that is a thin return before rates, insurance, maintenance and a mortgage.

Tax settings are at least friendlier than they were. Interest on residential rental borrowing became fully deductible again from the 2025-26 income year, and the bright-line test dropped to two years for properties sold under a contract signed on or after 1 July 2024, so an owner who has held the house more than two years will generally not face a bright-line bill when they do sell.

There may also be more unsold stock out there than the listings suggest. Property coach Steve Goodey told RNZ that some properties never register on the market at all, giving the example of a developer with ten units who advertises only one to cut marketing costs.

Three thousand homes a year moving from the for sale column to the for rent column is a small number against nearly 33,000 listings. It is still a useful signal of how many owners have decided that waiting is cheaper than selling, and every one of them is a household that has swapped a clean exit for a business it did not plan to run.

Have you ended up renting out a house you meant to sell, or are you weighing it up now? Tell us how it has gone in the comments below.

This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂