What Would Happen If Property Investors Disappeared?

The idea of removing all property investors might seem like a noble fix to housing affordability, especially for first-home buyers. But when we did the numbers, the implications were far more severe than most would imagine.

Currently, private property investors own around 440,000 homes in New Zealand, which accounts for about 21% of all dwellings. Importantly, 84% of these are rental properties. If investors disappeared overnight, roughly 1.2 million Kiwis – based on an average household size of 2.7 – would be displaced, and there’s no way the government could house them all.

Let’s imagine renters suddenly had to buy their homes. With the average house price sitting at $903,000 and the average weekly rent at $560, mortgage repayments would need to mirror rent for affordability. To make this viable, house prices would need to plummet 51.5% to around $438,000.

But this kind of drop would devastate the economy. The housing market underpins New Zealand’s financial system. A 50% value collapse would render banks insolvent, cause a total freeze of capital markets, and likely push the country into a full-scale depression. That’s not just homeowners affected – savings, deposits, and economic stability would vanish with it.

Some argue the government could step in to solve the issue. But even buying out the 21% of properties currently held by investors would cost $400 billion – a staggering 93.6% of New Zealand’s annual GDP. Any solution requiring a mass acquisition and redistribution of housing would either cripple the financial system or simply be logistically impossible.

So, what’s the path forward? Realistically, creating a homeownership rate that includes 90–95% of Kiwis would take two to three generations of systemic changes. These might include building more housing stock, adjusting lending rules, and gradually winding down debt-to-income ratios – but none of it will offer instant results.

The truth is, we can’t fix affordability by simply building more houses or tinkering with supply and demand. Housing, lending, and economic policy are deeply intertwined – change must come slowly and strategically.

One potential area for immediate improvement is renter security. In Europe and the UK, long-term rental arrangements offer families the stability they need to build a life. In New Zealand, encouraging landlords to uphold healthy home standards and providing better rights for tenants could create a more balanced and functional rental market.

On the flip side, regulatory overreach – like the fallout from the CCCFA changes – has shown that excessive intervention can backfire, making it harder for average Kiwis to borrow and buy. Trusting banks to make prudent lending decisions could be part of a more workable, short-term approach.

• Removing property investors would displace 1.2 million people and collapse the rental market.

• House prices would need to drop 51.5% for mortgage repayments to match current rents.

• Such a drop would likely bankrupt banks and plunge NZ into a financial depression.

• A government buyout of investment property would cost 93.6% of GDP – not viable.

• Improving renter rights and healthy homes standards may offer more practical solutions.

• True affordability for most Kiwis will take multiple generations of gradual change.

Whether you’re a first home buyer, a property investor, or looking to refinance, the team at Lighthouse Mortgages can help you find the right solution tailored to your goals – not the banks.

If you’d like to learn more, check out these other episodes below.