ANALYSIS: Every month, I run five surveys that give some coalface insights into what is happening or set to happen with business investment, household spending, and the housing market. My first survey for 2026 was run last week and covered residential property investors.
A few things have come through clearly in the survey. First, good tenants remain hard to find. The net proportion of investors saying it is hard to find a good tenant came in at 35%. A year ago, this was 20% and 20 months ago, a net 14% said that it was, in fact, easy to get the sort of people they like.
The results suggest that competition for tenants is going to keep downward pressure on rents through 2026, assisted by other data showing rising house construction alongside a continuing oversupply of townhouses in some parts of the country, particularly Auckland.
Second, more investors want out. I offset the proportion of investors saying they want to buy another property (16% from 22% a year ago) against the proportion who say they want to sell (38% from 29% a year back). The net result is 21% saying they intend to sell. This is the greatest such result in the five years I have been running this survey, and it tells us that for house buyers, the options to purchase are likely to remain good.
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Third, the discussions about the Reserve Bank cutting interest rates too much and the rises pegged for 2026 have caused a spike in angst about financing costs. For almost all of the second half of last year, just 3% of landlords said they were worried about rising interest rates; now that proportion sits at 8%.
I expect this proportion will rise as we move through the year and the inflation risks I’ve been highlighting for the past 12-15 months become more obvious. The biggest risk surrounds business margin rebuilding.
Business profit margins have been crunched in recent years. Costs have soared, and the ability to pass on those higher costs to consumers has been constrained by weak confidence and higher unemployment. But surveys have been telling us that once customers start to return, businesses plan to put up their prices to recoup lost margins.
The survey I have focused on most is the monthly one conducted by ANZ, which includes a question regarding what businesses plan to do with their prices over the coming year. On average, since inflation fell to 2% in 1992, a net 26% of businesses have said they plan price rises.
Independent economist Tony Alexander: "For house-buyers, the options to purchase are likely to remain good." Photo / Fiona Goodall
Four years ago, this measure hit a net 81%. It eased to 35% come mid-2024 but has since climbed back up to 52%. Pricing plans are running at twice the level consistent with low inflation, and this appears to be one of the things the Reserve Bank missed when analysing the economy and determining interest rate levels.
Less than a week ago, we saw solid proof of this under-estimation with the Consumers Price Index data from Statistics NZ showing a full year rise of 3.1% and not the 2.7% the Reserve Bank forecast less than two months ago.
Our central bank has a well-established history of tightening monetary policy too late, then tightening too much, followed by easing too late, then easing too much. If it stays true to this pattern, then the first rise in the 2.25% Official Cash Rate won’t come until 2027. But if it has learned something from its policy mistakes, then rises will start sometime in the second half of the year.
Either way, the drift for borrowing costs is now upward in uncertain fits and starts.
- Tony Alexander is an independent economics commentator. Additional commentary from him can be found at www.tonyalexander.nz
