NEW ZEALAND Trends and Developments Contributed by: Briar Shaw, Julia MacGibbon, Kate Hatwell, Tina Liu, Jessica Phillips and Natalie Foster, Tompkins Wake
For property investors, the government has reinstated interest deductibility for residential investment prop - erties and adjusted the bright-line test for residential property disposals, decreasing it from ten years to two years. These settings create a more favourable environment for residential property investment than has existed for several years. More recent changes under the current govern - ment include changes to the foreign investment fund (FIF) rules. Budget 2026 has raised the FIF de mini - mis threshold from NZD50,000 to NZD100,000, and expanded the revenue accounts method for unlisted shares to all New Zealand tax residents rather than just recent migrants. Budget 2026 also demonstrates the government’s commitment to returning the Crown’s accounts to surplus in 2028/29 (a year earlier than forecast), while prioritising capital expenditure in infrastructure, par - ticularly in transport, defence and health. For busi - nesses in the construction, engineering and pro - fessional services sectors, the public infrastructure pipeline remains a critical source of activity, although the pace and sequencing of major projects will be closely watched as the election approaches. Key policy areas to monitor include the following. • Taxation: Budget 2026 includes proposals to simplify the way fringe benefit tax applies to motor vehicles and to improve the Research and Devel - opment Tax Incentive to ensure it remains well targeted to increase business investment in R&D. Changes to the Goods and Services Tax Act are also on the horizon, as Inland Revenue is seeking feedback on a range of current GST issues. • Resource Management Act reform: the RMA reform is underway, and the RMA replacements – the proposed Planning Bill and Natural Environ - ment Bill – are expected to create a faster, more predictable consenting regime, with direct implica - tions for property development and infrastructure delivery. Budget 2026 has provided the first major investment into the foundations that would under- pin the new planning systems, including a centrally managed platform for planning, consenting and monitoring.
• Immigration settings: ongoing adjustments to work visa categories and skill shortage lists affect work - force planning across a number of industries. The introduction of the two new investment categories under the Active Investor Plus Visa is intended to attract high net worth investors to the country. • Foreign investment: the overseas investment reforms and investor immigration pathways are positive signals to the international investment community that New Zealand is still open for busi - ness. For businesses with a medium to long-term horizon for the New Zealand market, it is worth stress-testing strategic plans against policy scenarios once they are available. Construction and Commercial Property: Finding the Floor New Zealand’s property and construction markets enter 2026 in a period of careful reset. After sever - al years of cost escalation, rising interest rates and subdued occupier demand, conditions are stabilis - ing, although recovery is measured. For international investors and businesses assessing their exposure to the New Zealand market, two areas are particularly worth understanding: • the commercial property leasing and investment environment; and • the significant infrastructure pipeline that continues to underpin construction sector activity. Commercial property: stabilisation and the case for optimism Auckland’s commercial property market has faced pressure over the past two years. Across office, retail and industrial sectors, the forward develop - ment pipeline has thinned markedly compared with the last decade, as development and funding costs have exceeded rents required for feasibility, with many occupiers remaining cautious. Whilst face rents have remained stable, higher incentives have become more common in negotiations, so headline rents have not always reflected the net economics of new leases. The market is showing signs of improvement. Total investment returns improved materially in 2025 and
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