Budget 2026 is a budget of discipline. Finance Minister Nicola Willis has delivered a tight package built around a net operating allowance of $2.1 billion per year — smaller than any recent predecessor — alongside a $2.4 billion public service savings drive and a focus on frontline services in health, education and law and order.
The big story for New Zealand’s economy is context: conflict in the Middle East has injected fuel price pressure into the system, and the Government has responded with a targeted relief package rather than structural reform. Treasury forecasts show growth continuing and inflation expected to come down after an initial spike — but the path to surplus has been pushed out to 2028/29.
For the property sector, Budget 2026 is a mixed picture. The headline infrastructure commitments — a new Road of National Significance, rail upgrades, school and hospital construction — will generate activity in the sector. The $400 million council housing growth incentive and the $294 million for resource management reform are both direct responses to advocacy Property Council and the wider sector have been making for years. But several of our long-standing asks — Build to Rent recognition, commercial building depreciation, and targeted seismic incentives — remain unaddressed.
Here is our read of what Budget 2026 means for you.
Key points for the property sector
- $400 million financial incentive for councils to encourage housing growth. This is the GST-sharing-adjacent mechanism Property Council has been advocating for. The detail of how this fund operates will be critical — we will be watching closely and engaging with the Government on its design.
- $294 million to drive forward resource management reform. This is a significant allocation to implement the replacement of the Resource Management Act — one of Property Council’s core advocacy priorities. Resourcing the reform properly is essential to ensuring the new planning framework delivers for development.
- Social housing shake-up. $69 million to fund up to 2,250 additional social houses. Alongside this, a fiscally neutral package will increase the Accommodation Supplement for private renters while increasing income-related rents for social housing tenants. The overall package is intended to improve fairness and sustainability, though the impact on 80,000 families whose support reduces by around $30 a week will need to be monitored.
- Energy transition loan guarantee scheme. The Government will guarantee 80 per cent of eligible loans for businesses transitioning away from gas dependence — unlocking an estimated $1.2 billion in bank lending. For building owners managing gas infrastructure costs and energy transition compliance, this is a relevant tool.
The New Zealand economy at a glance
The economic backdrop to Budget 2026 is one of cautious recovery interrupted. Conflict in the Middle East has pushed up global fuel prices, feeding through to inflation and cost pressures across the economy. Treasury forecasts show New Zealand’s economy continuing to grow, with inflation expected to ease after an initial fuel-driven spike, but the recovery is slower and more uncertain than hoped.
- Net operating allowance of $2.1 billion per year — one of the tightest Budget packages in recent memory.
- Operating balance forecast to return to surplus in 2028/29 — with the government debt curve expected to stop rising and head downward from around that point.
- Net core Crown debt is forecast to peak at around 46 per cent of GDP before declining.
- Total government spending in 2026/27 is forecast at $155 billion, with health ($34.2 billion), education ($22.4 billion), New Zealand Superannuation ($26.5 billion) and social security ($27 billion) the largest areas.
- Crown revenue in 2026/27 is forecast at $67.9 billion from individuals’ income tax, $33.1 billion from GST and $20.3 billion from corporate tax.
- Total infrastructure spending over the next four years is expected to reach approximately $60 billion, on top of the new Budget allocations.
Where is the money coming from?
The Budget is funded through a combination of new revenue measures, savings from existing programmes and a significant public service restructure.
- $2 billion in savings from future baseline reductions across government agencies, delivered through productivity improvements, agency mergers and efficiency gains.
- $424 million of savings reprioritised to frontline services from back-office and administrative functions.
- Ending the final-year Fees Free tertiary scheme saves just over $1 billion. Some of this is reinvested in Trades Academy places and Youth Guarantee.
- Approximately 8,700 public sector roles to be eliminated by 2029, largely through attrition and restructuring, delivering the bulk of the $2.4 billion savings programme.
- A new prudential levy on banks and financial institutions will recover the cost of Reserve Bank regulation and supervision.
- Lower maximum Temporary Additional Support payments generate $196 million in welfare savings.
- Total new expenditure over four years is $14.7 billion operating and $7 billion capital, offset by $6.4 billion in savings and revenue — a net package of $8.3 billion operating and $5.7 billion capital.
How did the Budget stack up against Property Council’s priorities?
Before the Budget, Property Council New Zealand called on the Government to back practical measures that would support investment, housing growth and infrastructure delivery. Here is how Budget 2026 responded.
Property Council Priority
Property Council Recommendation
Government Response
Housing
Support community housing providers to deliver more social housing.
Financial incentives for councils to enable growth e.g. implement a GST-sharing model, as signalled in the coalition agreement.
- Positive: Additional $69m for the Housing Flexible Fund to support the delivery of up to 2,250 social homes and other housing solutions.
- Positive: $400m allocated as a new financial incentive for councils to encourage housing growth.
Build to Rent
Extend Investment Boost to include Build to Rent developments.
- Missed opportunity: Build to Rent remains excluded from the Investment Boost regime. Property Council will continue to advocate for BTR’s inclusion, and we are seeking further engagement with Government on the design of any minimum ownership conditions.
Infrastructure to support housing
Increase funding and finance for regional and national infrastructure projects that will support housing.
- Positive: Around $60 billion in total infrastructure investment over four years. See below.
- $1.8 billion for the Cambridge to Piarere Expressway;
- $705 million capital and $477 million operating for rail;
- $470 million for school redevelopment.
Seismic strengthening incentives
Provide targeted tax incentives for seismic strengthening work on commercial buildings.
- Missed opportunity: No new action beyond existing Investment Boost settings. Capital improvements to commercial and industrial buildings — including strengthening work — remain eligible for the 20% Investment Boost deduction introduced in Budget 2025.
- Missed opportunity: No additional seismic-specific incentive was announced.
Tax
Reinstate depreciation on commercial buildings to encourage reinvestment and sustainability upgrades.
Make changes to overseas investment rules to encourage investment in the New Zealand economy.
- Missed opportunity: Depreciation on commercial buildings not reinstated.
- Neutral: Changes to tax rules to support foreign investment and talent retention.
Planning
Ensure the Government’s major planning reforms are properly resourced through Budget 2026.
- Positive: $294 million allocated to drive forward resource management system reform.
Environment and sustainability
Support building owners managing energy transition costs and compliance.
- Positive: Loan guarantee scheme introduced: the Government will guarantee 80% of eligible loans for businesses transitioning away from gas, unlocking an estimated $1.2 billion in bank lending. Relevant for commercial building owners.
Political Analysis
A budget of structural reform, not new stimulus
Budget 2026 is best understood not through its spending announcements, but through its reform agenda. The Government has been explicit: this is a budget focused on fixing the back end of government so the front end can perform better. For the property sector, that means the biggest near-term impacts are not found in the Budget document itself, but in the reform programmes running alongside it.
Resource management reform, building consenting reform, local government restructuring and development levies reform are all live and consequential. Budget 2026 is the fiscal backdrop against which all of these are playing out — and the question of whether councils and agencies receive enough support to implement change effectively will matter greatly for property sector confidence and pipeline activity.
The $400 million housing growth incentive: a significant win
The single most important announcement for Property Council’s advocacy agenda is the $400 million financial incentive for councils to encourage housing growth. For years, Property Council has argued that local government needs a positive financial reason to enable development, not just a compliance obligation. This fund is the first time that principle has been translated into Budget dollars.
The detail matters enormously. If the fund is designed well — tied to genuine consenting activity, new connections, or housing completions — it could be transformative for councils that have historically treated growth as a fiscal burden. If it is poorly designed or captured by existing council processes, it will underdeliver. Property Council will engage directly with the Government on the fund’s design.
Councils will receive payments based on a proportion of the national average new dwelling consent value, with funding levels increasing as councils enable higher rates of growth:
- 0.25% of national average consent value for growth up to 1% of existing dwellings
- 0.5% for growth between 1% and 2%
- 1.25% for growth beyond 2%
This creates a stepped incentive structure that directly rewards councils for moving beyond baseline growth and supporting higher levels of housing delivery.
Funding can be used for infrastructure-related capital and operating costs to support growth, such as local roads, parks, libraries, and community infrastructure, but excludes water infrastructure and costs already recoverable through development contributions or levies. Councils will also be required to report annually on how funding is used.
At this stage, detailed implementation settings will be important, and we will be seeking further clarity on how the scheme will operate in practice and whether it effectively shifts incentives across all councils, particularly those facing the greatest growth constraints.
Infrastructure: backing delivery, not just announcements
Infrastructure investment is the backbone of everything the property sector does. New homes, commercial developments, revitalised city centres – none of it happens without the infrastructure that makes places work. The global supply disruption affecting oil, plastics and construction materials puts cost pressures on construction and makes it more important than ever to keep that pipeline going.
Property Council has consistently supported ambitious infrastructure investment, and we welcome the Government’s continued focus on building a sustainable long-term pipeline.
Key new investments include:
- $1.8 billion for the Cambridge to Piarere Expressway (a Road of National Significance and extension of the Waikato Expressway)
- Over $1 billion total rail investment, including $705 million capital and $477 million operating funding to renew and upgrade New Zealand’s rail network (supporting KiwiRail’s planned upgrades)
- $400 million for state highway resilience upgrades, targeting vulnerable corridors including SH25 in the Coromandel and SH2 through Waioweka Gorge
- Capital investment of $682 million in healthcare, including a new tower block for Whangārei Hospital.
This is a meaningful continuation of the Government’s focus on core enabling infrastructure, particularly transport resilience and connectivity, which are critical to supporting housing delivery and economic productivity.
RMA reform funding: a necessary investment
The $294 million for resource management reform signals that the Government is serious about implementation — not just legislation. This is important. Property Council has long argued that good policy on paper counts for little if councils lack the capability and resourcing to implement it. The test will be whether this funding flows to where it is needed: to councils managing the transition to the new planning framework.
Fuel cost relief: backing business through the energy crunch
New Zealand’s tightening natural gas supply is placing real pressure on businesses facing rising and unpredictable energy costs. Property Council acknowledges the Government’s recognition of these challenges, and we welcome targeted support announced today as a practical response to growing energy security concerns.
For the property sector, energy uncertainty impacts operating costs, tenant resilience and investment confidence. Today’s announcement of the Government-backed Gas Transition Loan Guarantee Scheme will provide up to $1.2 billion in lending support for businesses reducing reliance on natural gas. The Crown will underwrite 80 percent of eligible loans, helping businesses access lower interest rates through participating banks. Loans will be capped at $50 million, with repayment terms of up to 10 years. Eligible businesses must use reticulated natural gas, consume at least 1000 gigajoules annually, and demonstrate gas savings through fuel switching or energy efficiency improvements.
Wellington: the canary in the coalmine
The public sector restructure is potentially the budget story with the most direct and sustained impact on the property sector — and Wellington bears the brunt. With 8,700 public sector roles to be eliminated over three years, the capital faces a prolonged period of office market pressure. CBD vacancy is already elevated; leasing demand will soften further as agencies consolidate footprints or exit buildings.
For Wellington-based members with office exposure, this is a period that requires careful portfolio management. Property Council will continue to monitor Wellington’s commercial market and provide members with updated analysis as the restructure progresses.
What the Budget didn’t do
Three asks from Property Council’s pre-Budget wishlist went unanswered: Build to Rent recognition within Investment Boost, the reinstatement of commercial building depreciation, and new seismic strengthening incentives beyond the existing Investment Boost settings.
These are not small asks — the absence of commercial depreciation in particular represents a missed opportunity to encourage reinvestment in New Zealand’s ageing building stock at a time of rising upgrade costs and sustainability pressure. Property Council will continue to make the case for each of these measures in the second half of 2026.
Conclusion: The “Responsible” Budget
Budget 2026 is not the budget the property sector was hoping for — but it is not without merit. The $400 million housing growth incentive and the $294 million for RMA reform implementation are genuine responses to long-standing advocacy, and the infrastructure pipeline — particularly the new Road of National Significance and rail upgrades — will generate real activity in the construction and development sector.
The fuel price shock has added complexity to an already constrained fiscal environment, and the Government has responded in a way that prioritises temporary relief over structural change. That is defensible — but it does mean another year passes without action on commercial depreciation, Build to Rent or seismic incentives.
Property Council will engage actively on the design of the council housing growth incentive, the implementation of RMA reform, and the ongoing case for the measures that remain unaddressed. We will provide members with further analysis as more details on individual programmes become available.
Property Council looks forward to continuing to work with the Government to ensure New Zealand has the investment settings it needs to grow. The opportunity is there. Let’s back it.