New Zealand is the only country in the OECD that offers no tax depreciation on commercial or industrial buildings, and Property Council New Zealand says the gap is costing the country dearly.
New Zealand is now the only country in the OECD that offers no tax depreciation on commercial or industrial buildings. That is not a badge of honour. It is a policy gap that is quietly costing the country billions of dollars in delayed and cancelled capital works, at exactly the point when our cities need more investment in better, safer, more sustainable buildings, not less.
Property Council New Zealand is calling on the government to permanently reinstate depreciation for non-residential buildings, and to extend it to the Build to Rent sector on the same basis. This is one of our five central government advocacy priorities for 2026, and it is one of the more fixable problems in the property tax system.
A policy that reflects reality - then stopped
Depreciation exists in tax law for a simple reason: buildings wear out. Roofs, services, seismic systems, cladding and interiors all degrade over time, and a tax system that ignores this fact is a tax system that is out of step with reality.
Depreciation for non-residential buildings was reinstated in 2020 to reflect exactly this reality, then removed again in 2024. New Zealand is now the only country in the OECD without depreciation for both commercial and industrial buildings. That removal sends a clear signal to owners and investors: the cost of holding and maintaining a building is no longer fully recognised by the tax system, so upgrading it becomes harder to justify.
What is actually at stake
The impact is not abstract. Property Council and Urban Economics research points to billions of dollars in projects and capital works at risk of being delayed or cancelled as a direct result of losing depreciation, alongside reduced property values and higher costs passed through to tenants.
Without depreciation, owners face a straightforward, unwelcome calculation: money spent on seismic strengthening, insulation, better ventilation or modern fit-outs is money that receives no tax recognition at all, even though the underlying asset is depreciating in real, physical terms. In a high-cost, high-interest environment, that is exactly the kind of investment that gets deferred or shelved first.
That matters well beyond the buildings themselves. Reduced maintenance and upgrade spending means:
- slower progress on seismic strengthening of older commercial and industrial buildings.
- fewer environmental and energy efficiency upgrades across the country’s non-residential building stock.
- declining building quality over time, at a cost to the tenants, workers and communities who use those buildings every day.
- reduced confidence to commit capital to new development, at a time New Zealand needs more of it, not less.
The case for permanence
A tax setting that can be reinstated one year and removed the next is almost as damaging as having no depreciation at all, because it undermines the long-term confidence that investment decisions depend on. Property Council’s position is that depreciation for non-residential buildings should be reinstated on a permanent basis, not left to be reconsidered at the next fiscal reset.
Permanence gives owners and investors a stable platform to plan around. It means a seismic strengthening programme, an energy efficiency retrofit or a major refurbishment can be assessed on its genuine long-term merits, rather than on a tax setting that could be withdrawn again.
Extending fair treatment to Build to Rent
Build to Rent is playing an increasingly important role in New Zealand’s housing supply, offering long-term tenure, professional management and purpose-built quality that the market has historically lacked. Property Council has worked with successive governments to establish Build to Rent as a recognised asset class, including improved interest deductibility and changes to the Overseas Investment Act to support institutional investment in the sector.
The next step is consistency. Build to Rent should be treated on a like-for-like basis with other large-scale property asset classes, including access to depreciation. Extending depreciation to Build to Rent, alongside other settings such as the Investment Boost scheme and depreciation for fit-outs, would remove an unnecessary barrier to a sector that is helping to deliver more, better rental housing at the scale New Zealand needs.
What we are asking government to do
Property Council’s recommendation to central government is clear:
- reinstate depreciation for non-residential buildings on a permanent basis.
- extend depreciation to the Build to Rent asset class, on a consistent, like-for-like basis with other property sectors.
Chief executive Leonie Freeman says the case for change is straightforward.
“New Zealand is the only country in the OECD without depreciation for commercial and industrial buildings. That is not a technicality; it is a genuine disincentive to invest in the maintenance, strengthening and upgrading of the buildings New Zealanders work, shop and live in every day. Our research points to billions of dollars in capital works at risk of being delayed or cancelled because of this setting. Reinstating depreciation permanently, and extending it fairly to Build to Rent, would give owners and investors the certainty they need to keep our building stock safe, efficient and fit for the future.”
Property Council will continue to press this case with government as part of our 2026 advocacy priorities, alongside our broader push for fairer regulation and tax settings across the property sector. If you want to stay up to date about the latest changes happening in this workstream, get in touch with Samantha, Tax and Regulation lead.
Author | Samantha Lay Yee
Samantha brings a sharp policy mind and deep understanding of urban development to her role as Senior Advocacy Advisor. With a Master of Laws specialising in environmental law, she has built her career at the intersection of government, regulation and city-shaping policy.
Prior to joining Property Council, Samantha held a senior advisory role at Kāinga Ora where she led a complex investment management work programme. She also brings policy experience from the Ministry for the Environment and the Department of Internal Affairs. In those roles, she developed regulatory advice for Ministers and contributed to nationally significant urban development reforms. Her experience spans cross-agency collaboration, stakeholder engagement and translating complex policy into clear, actionable insights.
Analytical, thoughtful and highly respected, Samantha combines strategic thinking with a practical approach – helping shape policy settings that enable better outcomes for New Zealand’s built environment.
