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While offering little immediate relief for homeowners or buyers, it establishes foundations for long-term market stability and targeted growth through infrastructure investment. First-home buyers face a complex landscape with revised KiwiSaver policies, while existing homeowners may need to wait for infrastructure-driven value increases to offset recent market stagnation.
What are the implications for the housing market?
New Zealand's housing market has remained flat, with median national house price hovering between $750,000 and $801,000 for the past two years. Regional variations exist, but most major cities have experienced negative price growth of 12-13 per cent over the last three years, with Christchurch alone showing a more modest 2.4 per cent decrease. Although this price stability paired with lower interest rates and increased housing stock benefits first home buyers, it creates challenges for existing homeowners who may feel trapped by lower property values.
Unlike the 2024 budget, which emphasized individual tax benefits, this year's focus is firmly on long-term investment and business growth. Although Kiwis can expect little immediate relief, the potential is overwhelmingly positive.
Infrastructure development
The $2.7 billion "build our way out" strategy, anchored by major investments in healthcare ($1+ billion), education ($734 million), and transportation ($460+ million for rail), will create ripple effects throughout regional property markets. These infrastructure projects typically generate both immediate construction employment and long-term value appreciation in surrounding areas.
For property investors and homeowners, these developments present targeted opportunities. Areas receiving new hospitals, schools, or enhanced rail connectivity historically experience above-average property value growth. The rail network upgrades in particular could expand commuter catchment areas, potentially revitalizing housing markets in previously less accessible regions.
KiwiSaver
The KiwiSaver changes in Budget 2025 present a mixed bag for first home buyers, balancing higher contribution rates against reduced government support. For aspiring homeowners, the increased default contribution rates (rising to 3.5 per cent by 2026 and four per cent by 2028) will accelerate savings growth, while extending benefits to 16-17 year olds enables earlier saving.
However, halving the government contribution to 25 cents per dollar (capped at $260.72) reduces a valuable boost that many first home buyers have relied on. This reduction, along with the elimination of government contributions for those earning over $180,000, shifts more of the saving burden onto individuals and employers.
Investment boost
The centrepiece of Budget 2025 is the investment boost, a tax incentive allowing businesses to deduct 20 per cent of new asset values beyond normal depreciation. Although the investment boost tax incentive doesn’t directly target homeowners or first home buyers, it is expected to lift wages by 1.5 per cent over the next twenty years, with half coming in the first five years. Ultimately, the goal of the investment boost is to make New Zealand a more attractive investment destination.
Future outlook
The 2025 Budget sets a trajectory favouring long-term housing market stability over immediate stimulus. In the near term (one to two years), expect continued subdued performance as the economy adjusts to tighter fiscal conditions.
The medium term (three to five years) should deliver the first substantial benefits from the growth strategy, with the Investment Boost driving wage improvements of approximately 0.75 per cent and infrastructure investments creating localized property value increases.
Long-term prospects (five plus years) appear more promising as economic restructuring takes hold, with higher KiwiSaver contribution rates enabling more first home purchases and mature infrastructure investments supporting sustainable property value growth.
