A client of ours described the moment clearly. She had reached her early sixties with an investment property, a bach, and a financial plan that had always assumed both would eventually look after things. Then she sat down and looked at what each one actually cost her every year. The numbers surprised her. Not in a catastrophic way. But enough to make her rethink.
Property has an almost mythological status in New Zealand retirement thinking. If you own it, you feel covered. The asset is there, it is big, it is real. What gets far less attention is what property costs to hold, and how much those costs have changed in the past three years.
Council rates across New Zealand rose 34 percent between 2022 and 2025, against general inflation of around 14 percent over the same period. House insurance premiums rose roughly 56 percent nationally. Maintenance costs have not gone backwards either. None of these are dramatic events. They are steady annual increases that accumulate, compound, and over a fifteen-to-twenty-year retirement can substantially reshape what a property is actually worth to you.
The numbers most plans do not do
Consider a couple entering retirement holding an investment property and a bach. Starting rates, insurance, and maintenance across both might add up to around $32,500 per year. At five percent annual cost growth, which is a moderate assumption given recent trends, that becomes roughly $53,000 after ten years and $86,000 after twenty.
If the investment property generates rental income, some of that is offset. But net yield on a well-managed Auckland residential rental has typically run between two and three percent in recent years, after management fees, vacancy, and maintenance. The holding costs need to come off that yield to understand what the property is actually contributing.
A bach that is not rented generates no income at all. It is a lifestyle asset with real ongoing costs. That is a legitimate choice. But the rest of the retirement plan has to carry it, and needs to be sized accordingly.
The insurance question is changing
Rising premiums are one issue. A more serious issue is what happens beyond that. In parts of New Zealand facing elevated flood, coastal erosion, or earthquake risk, some major insurers have already pulled back from providing automatic quotes, or are applying exclusions that effectively remove coverage for the most likely events.
A property that cannot be fully insured becomes very difficult to sell to a buyer who needs a mortgage, because lenders require proof of insurance as a condition of lending. The buyer pool shrinks to cash purchasers only, and cash buyers price in the risk they are absorbing. In some cases the discount makes the property effectively illiquid at anything close to its assessed value.
For a bach in a coastal location, the relevant question is not whether it is insurable today. It is what its insurable status is likely to be in 2035 or 2040. That is a question you should ask well before retirement, not after.
The risk already inside the walls
Between approximately 1988 and 2004, construction practices produced an estimated 174,000 homes with serious weathertightness problems. The crisis is not over. Properties affected but not remediated remain on the market. Full remediation typically costs between $150,000 and $500,000 or more, and the scope almost always expands once the work begins.
Two client situations in our white paper illustrate how this plays out. In one, inherited commercial properties that appeared to be a working asset progressively consumed the financial cushion the client had built independently over several years. In another, a leaky home discovery mid-retirement delayed the target date and required the couple to work longer and save more just to recover the ground the remediation had taken.
The lesson in both cases is the same. Hidden or unexamined cost risks carried into retirement do not stay hidden. They come to light at the worst possible time, when there is least flexibility to absorb them.
What this means for your plan
This is not an argument against holding property in retirement. Many of our clients do, and it makes sense as part of a well-structured financial life. The argument is more specific: property needs to earn its place in the plan, and earning that place requires an honest account of what it costs, what it generates after all costs, and what the risk profile looks like without optimism bias.
That means knowing the net yield, not the gross. Reviewing insurance annually rather than auto-renewing. Understanding the weathertightness history of anything you hold. Looking at the LIM for coastal or flood-prone baches. And making sure there is enough liquidity elsewhere in your financial structure to absorb a significant maintenance event without disrupting retirement income.
Our white paper, You Can't Eat Bricks, goes through all of this in detail, including rates, insurance, maintenance, leaky buildings, the political risk of changing tax rules, and the seven questions worth working through if you hold investment property or a bach. It also includes a frank assessment of downsizing, and why it rarely releases the capital people expect.
If property is part of your retirement picture, the white paper is a worthwhile read before your next planning conversation.
Download it at the link below.
