NZ Property Investment Glossary

The gradual repayment of a loan’s principal balance over time through regular scheduled payments. With a principal and interest mortgage, each payment covers both the interest charge and a portion of the principal — so the outstanding balance falls with every payment. By contrast, an interest-only mortgage has no amortisation: the principal remains unchanged until repaid as a lump sum or refinanced. See: Interest-Only vs P&I guide

An organisation of unit owners that collectively manages shared areas and services in a multi-unit development (apartments, townhouses, or unit title properties). Body corporate fees (levies) are paid annually or quarterly and cover building insurance, maintenance of common areas (lifts, gardens, car parks), and administration. Levies vary widely — from a few hundred to several thousand dollars per year — and must be factored into net yield calculations. Body corporate records (minutes, financials) should be reviewed before purchase.

A security deposit collected by a landlord at the start of a tenancy and held by Tenancy Services NZ. The maximum bond is 4 weeks’ rent. At end of tenancy, the bond is returned to the tenant unless there are unpaid rent arrears or damage beyond fair wear and tear. Disputes over bond returns are resolved through the Tenancy Tribunal.

A short-term loan used to “bridge” the gap between purchasing a new property and receiving proceeds from selling an existing one. Bridging finance allows buyers to proceed with a purchase before their current property settles. Interest rates on bridging loans are typically higher than standard mortgages, and the term is usually 3–12 months. Some lenders offer “open-ended” bridging (no set repayment date) or “closed” bridging (fixed repayment date tied to a contracted sale settlement).

A tax rule that treats profit from selling residential property as taxable income if the property is sold within a set period of purchase. From 1 July 2024, the bright-line period returned to 2 years for all residential property, down from the previous 10 years. If you sell within 2 years and no exemption applies, the profit is taxed at your marginal income tax rate (up to 39%). The main home exemption applies if you lived in the property for most of the ownership period. Does not apply to commercial property or farmland. See: Bright-Line Test guide

The increase in a property’s value over time. In NZ, residential capital gains are generally not taxed — unless the bright-line test applies (property sold within 2 years of purchase). Capital growth is the primary return driver for low-yield markets like central Auckland and Wellington. Investors who rely on capital growth typically accept lower rental yields in exchange for expected price appreciation. See: Yield vs Capital Gains calculator

The estimated market value of a property as assessed by the local council for rating (rates) purposes. CVs are reviewed every 3 years and often lag behind actual market values significantly — particularly in strong growth periods. A CV is not a reliable substitute for a registered valuation or market appraisal. Mortgage lending is based on market value, not CV.

The net money remaining each week or month after all property costs are paid. Calculated as: rental income minus mortgage repayments, rates, insurance, management fees, and maintenance. Positive cash flow means the property generates surplus income; negative cash flow (or negative gearing) means you must top up from your own income. Cash flow is distinct from rental yield — yield measures return on the asset value, while cash flow measures actual weekly income impact. Use the yield calculator to model cash flow.

Moveable items included in a property sale that are separate from the building structure — such as carpets, curtains, heat pumps, dishwashers, stoves, and light fittings. For tax purposes, chattels in a rental property can be depreciated annually, creating a tax deduction. The building structure itself cannot be depreciated. Chattels are listed in the sale and purchase agreement; buyers should confirm exactly what is included before signing unconditionally.

A lending structure where multiple properties are used as security for one or more loans, typically with the same lender. Allows investors to access equity across their portfolio without selling individual properties, but reduces flexibility — selling one property may require the lender’s consent and may trigger a loan restructure. Many property investors prefer to keep properties on separate loan facilities (“ring-fenced”) to maintain flexibility.

A tax deduction for the wear and tear of chattels (moveable items) in a rental property — such as carpets, curtains, heat pumps, and appliances. Each chattel has an IRD-prescribed depreciation rate applied to its cost or value. The building structure and land cannot be depreciated. Depreciation reduces taxable rental income each year without requiring an actual cash outlay, improving after-tax returns. Source: Inland Revenue NZ. See: Rental Property Expenses guide

The ratio of your total debt to your gross annual income. From July 2024, the RBNZ introduced DTI limits: investors can hold debt up to 7× gross annual income; owner-occupiers up to 6×. For example, an investor earning $120,000/year has a maximum total debt ceiling of $840,000. DTI limits apply across all borrowing (home loan + investment loans) and work alongside LVR limits — both must be satisfied. Rental income is typically included in the DTI calculation at a lender-specific haircut rate.

The difference between a property’s current market value and the outstanding mortgage balance. Example: a home worth $900,000 with a $500,000 mortgage has $400,000 equity. Equity can be used as collateral (security) to borrow against — allowing investors to buy additional properties without saving a separate cash deposit. Equity grows through property value appreciation and principal repayment (P&I loans). See: LVR Calculator

A mortgage where the interest rate is locked in for a set term — typically 6 months to 5 years in NZ. Provides repayment certainty during the fixed period but charges break fees if you repay or restructure early. NZ investors commonly fix for 1–2 years. At the end of the fixed term, you can refix, switch to a floating rate, or repay. Break fees can be substantial if market rates have fallen since you fixed.

A mortgage where the interest rate moves with the lender’s variable rate, which in turn tracks the OCR. Floating rates in NZ are typically higher than short-term fixed rates but offer no break fees — useful when you plan to sell or make large lump-sum repayments. Many investors hold a portion of their debt floating for flexibility while fixing the majority.

Full ownership of both the land and any buildings on it, with no ongoing ground rent obligations to a third party. Freehold (also called “fee simple”) is the most common and most preferred title type in NZ. Alternative titles include leasehold, unit title (apartments), and cross-lease. Freehold is simpler and more financeable — some lenders place restrictions on leasehold mortgages.

Annual rent income divided by purchase price, expressed as a percentage. Formula: (Weekly rent × 52) ÷ Purchase price × 100. Gross yield ignores all ownership costs (rates, insurance, management, maintenance) — it is used for quick initial screening and city-to-city comparisons. A gross yield of 5–7% is generally considered strong in NZ; below 4% is weak. See also: net yield • Yield Calculator

Mandatory minimum requirements for all NZ private rental properties, introduced under the Residential Tenancies Act. Cover five areas: heating (fixed heater capable of 18°C in main living area), insulation (ceiling and underfloor), ventilation (extractor fans in kitchen and bathroom), moisture and drainage, and draught stopping. All private rentals were required to comply by 1 July 2024. Non-compliance risks fines of up to $7,200 per infringement. Landlords must provide tenants with a Healthy Homes compliance statement. Source: Tenancy Services NZ.

A mortgage structure where only the interest component is repaid each period — the principal remains unchanged throughout the interest-only term. This lowers monthly repayments, improving short-term cash flow and maximising tax-deductible interest. NZ banks typically offer interest-only terms of up to 5 years for investment properties. At the end of the interest-only period, the loan reverts to principal and interest (P&I), often significantly increasing repayments. The principal must eventually be repaid or refinanced. See: Interest-Only vs P&I guide

A form of co-ownership where two or more people hold a property in equal, undivided shares. The key feature is the right of survivorship — if one owner dies, their share automatically passes to the surviving owners without going through the estate. Compare with Tenants in Common, where owners can hold unequal shares and each share can be left to anyone in a will. Joint tenancy is common for couples buying together; tenants in common is often used by investors or family trusts wanting separate ownership stakes.

NZ’s voluntary workplace savings scheme. First home buyers who have been KiwiSaver members for at least 3 years can withdraw most of their savings (leaving a minimum $1,000 balance) to put toward a first home purchase. The property must be in NZ and the buyer must intend to live in it. There is no house price cap on withdrawals. Applications are made through your KiwiSaver provider and typically take 10–15 working days. See: KiwiSaver withdrawal guide

A report obtained from the local council summarising all information it holds on a specific property — including building and resource consents, drainage plans, known flooding or erosion risks, scheduled land features, and rate assessments. A LIM typically costs $200–$500 and takes 5–10 working days. Strongly recommended before making any unconditional offer. Reveals issues not visible in a building inspection (unapproved additions, council hazard overlays, etc.).

A property title where you own the building but lease the land from a separate landowner, paying ongoing ground rent. Ground rents are reviewed periodically (often every 7–21 years) and can increase significantly. Leasehold properties are generally less desirable than freehold — they can be harder to sell, harder to finance, and the ground rent obligation reduces net return. Always check the ground rent review terms and date before purchasing a leasehold property.

The amount borrowed expressed as a percentage of the property’s value. RBNZ LVR limits: investors must have LVR ≤ 65% (35%+ deposit); owner-occupiers must have LVR ≤ 80% (20%+ deposit). Lower LVR = larger deposit = lower risk and typically better interest rates. New builds are exempt from investor LVR limits. Up to 20% of new investor lending can exceed the 65% cap under the RBNZ’s “speed limit.” See: LVR Rules guide • LVR Calculator

A forced sale of a property by a lender (mortgagee) when the borrower (mortgagor) defaults on loan repayments. The lender sells the property to recover the outstanding debt; any proceeds above the debt balance are returned to the borrower. Mortgagee sale properties may sell at or below market value due to urgency, limited disclosure, and buyer risk perceptions. Buyers at mortgagee sale have limited recourse if issues are discovered post-purchase — thorough due diligence (LIM, building inspection) is essential.

When total property ownership costs (mortgage interest, rates, insurance, management fees, maintenance) exceed rental income, resulting in a net loss. In NZ, this loss is deductible against other income — reducing total tax payable. With mortgage interest restored to 100% deductibility from 1 April 2025, investors can again claim full interest losses. Negative gearing is most common in Auckland and Wellington where gross yields are low (3.5–4.5%). Negatively geared investors typically rely on capital growth for their overall return. Opposite of positive gearing.

Rental income after deducting all operating expenses (rates, insurance, property management fees, repairs, vacancy allowance) divided by purchase price. More accurate than gross yield as a measure of actual investment return. Net yield typically runs 1.5–2.5 percentage points lower than gross yield. Use net yield to compare properties on a fair like-for-like basis. Use our yield calculator to calculate both automatically. See: Rental Yield Explained guide

The Reserve Bank of NZ’s benchmark interest rate, reviewed eight times per year by the Monetary Policy Committee. The OCR is the primary lever the RBNZ uses to control inflation. When the OCR rises, bank lending rates (including mortgage rates) typically rise; when it falls, mortgage rates typically fall. Property investors watch OCR decisions closely — rate cuts improve borrowing affordability and often boost property demand. Source: RBNZ — rbnz.govt.nz

A mortgage repayment structure where each payment covers both the interest charge and a portion of the principal (loan balance). P&I loans gradually reduce the outstanding balance over time, building equity and eliminating the loan by the end of the term. Monthly repayments are higher than interest-only but the loan is paid off. Most owner-occupier mortgages are P&I; investors may use interest-only for improved cash flow. Compare using our Interest-Only vs P&I calculator.

When rental income exceeds total ownership costs (including mortgage repayments), generating positive cash flow. Positively geared properties put money in the investor’s pocket each week. Common in high-yield regional cities like Gisborne (7.5–8.5%) and Palmerston North (6.5–7.5%). Positive gearing reduces reliance on capital growth and provides income security. Opposite of negative gearing. See: Best Cities for Rental Yield guide

A tenant’s statutory right under the Residential Tenancies Act 1986 to use and enjoy the rental property without unreasonable interference from the landlord. Landlords must give at least 24 hours’ written notice before entering the property (except in genuine emergencies such as fire or flood). Entering without notice, contacting the tenant excessively, or attempting to force a tenant out outside the proper notice process are all breaches. Breaches can be taken to the Tenancy Tribunal, which can award exemplary damages of up to $3,000 per breach. Source: Residential Tenancies Act 1986, Tenancy Services NZ.

NZ’s central bank and primary financial regulator. The RBNZ sets the OCR (Official Cash Rate), administers LVR (loan-to-value ratio) restrictions, and introduced DTI (debt-to-income) limits in July 2024. The RBNZ’s policy decisions directly affect mortgage rates, lending conditions, and property market activity. Its lending restrictions aim to reduce systemic risk in the banking system. Source: rbnz.govt.nz

An independent, written assessment of a property’s market value prepared by a registered property valuer (PINZ or NZIV member). More accurate than a council CV or real estate appraisal. Some lenders require a registered valuation for investment purchases, cross-collateralised portfolios, or non-standard properties. Cost: approximately $800–$1,500 depending on property type and location.

The annual rent income from a property expressed as a percentage of its value. Can be gross (before expenses) or net (after expenses). Used to compare investment properties and assess return relative to purchase price. In NZ, a gross yield of 5–7% is generally considered strong. See: Rental Yield Explained • Yield Calculator

The date on which ownership of a property legally transfers from seller to buyer and full payment is made. Settlement typically occurs 30–90 days after an offer is accepted unconditionally, though any timeframe can be negotiated. On settlement day, your solicitor transfers funds electronically, receives title documents, and hands over the keys. Occupation does not always coincide with settlement — check the sale and purchase agreement for the agreed possession date.

A legally binding contract between a landlord and tenant under the Residential Tenancies Act 1986. A tenancy can be fixed-term (specified start and end date; neither party can end it early without the other’s agreement except in limited circumstances) or periodic (no fixed end date; landlord can end with 90 days’ notice in specific situations; tenant can end with 21 days’ notice). Standard tenancy agreements are available from Tenancy Services. All landlords must provide a signed copy to the tenant within 3 days of the tenancy starting.

A search of the LINZ (Land Information NZ) register to confirm a property’s legal ownership, registered mortgages, caveats, covenants, and any other encumbrances or interests registered against the title. Conducted by a solicitor as part of the conveyancing process. Reveals any restrictions on use, third-party interests, or claims against the property that a buyer needs to know before completing a purchase.

An offer to purchase a property with all conditions satisfied or waived. Once a seller accepts an unconditional offer, the buyer is legally bound to complete the purchase. Standard conditions include finance (confirming mortgage approval), building inspection (satisfactory report), LIM (satisfactory council records), and solicitor review. Buyers at auction make unconditional offers immediately. Never go unconditional before completing all due diligence — pulling out after going unconditional forfeits the deposit and exposes you to legal action.

The percentage of rental properties in a market (or a landlord’s portfolio) that are untenanted at a given time. A low vacancy rate (below 2–3%) indicates a tight rental market where landlords hold pricing power. A high vacancy rate signals oversupply and may require rent reductions or incentives to attract tenants. Vacancy rates vary significantly by city, suburb, and property type. NZ national vacancy rates are tracked by MBIE from tenancy bond lodgement data.

New Zealand’s rental market quotes rent on a weekly basis — unlike many countries that use monthly figures. To convert: weekly rent × 52 = annual rent. Annual rent is used to calculate rental yield (gross yield = annual rent ÷ purchase price × 100). The maximum bond a landlord can collect is 4 weeks’ rent. Rent increases require 60 days’ written notice and can only occur once every 12 months. Use the yield calculator to enter a weekly rent figure and automatically calculate gross and net annual yield.

A property with weathertightness defects — gaps, failures, or poor construction that allow water to penetrate the building envelope and cause structural damage, rot, and mould. The “leaky home crisis” affected thousands of NZ properties built between approximately 1994 and 2004, particularly monolithic cladding (EIFS/plaster) homes with complex rooflines. Weathertight remediation can cost $100,000–$500,000+. Always commission a specialist weathertight inspection for any 1990s–2000s plaster-clad property. The Weathertight Homes Resolution Service (WHRS) was a government resolution scheme; most claims are now settled. Check for ongoing weathertight issues in the LIM and building file.

The annual return from a rental property expressed as a percentage of its purchase price or value. Yield is the primary measure of investment performance for NZ rental property. There are two versions: gross yield (annual rent ÷ purchase price × 100, before expenses) and net yield (after deducting operating costs such as rates, insurance, management fees, and maintenance). In NZ, a gross yield of 5–7% is generally considered strong; below 4% is weak. High-yield cities include Gisborne (7.5–8.5%) and Palmerston North (6.5–7.5%); Auckland is lowest at 3.5–4.5%. See: Rental Yield Explained • Yield Calculator

The classification of land by local councils that determines what can be built and how a property can be used. Common NZ residential zones include Low Density Residential, Medium Density Residential, Mixed Use, and Terrace Housing & Apartment Buildings (THAB). Higher-density zones allow more dwellings per site, increasing development potential and often property value. From August 2022, the National Policy Statement on Urban Development (NPS-UD) requires most councils to allow medium-density housing (up to 3 storeys, 3 dwellings per site) without resource consent in residential zones. Zoning determines development potential and directly affects investment strategy. Check the local council’s GIS mapping portal or the property’s LIM for the current zone classification.