Kiwi households are starting to feel more confident, as the benefits of lower interest rates and strong dairy prices flow through the New Zealand economy.
Retail sales rose in the second quarter across a range of industries, a very encouraging sign for the wider economy. This may signal that our economy has outperformed the Reserve Bank’s expected 0.3% GDP decline, which would be a confidence booster as we head into the fourth quarter (Q4). The regional spending data show the largest upticks are in Otago, Hawke’s Bay, Bay of Plenty and Nelson. That’s almost certainly a reflection of the robust dairy prices, with Fonterra recently upgrading its payout forecast to a new record high of $10.15 per kilo of milk solids.
Also encouraging is the manufacturing sectors’ return to expansion, which grew by 3.6% in July and moved back into growth territory. Hopefully this is the start of a trend, rather than a one-off, but only time will tell.
For the housing market, a shot in the arm: the Reserve Bank cut the official cash rate in August and indicated that it could make two further rate cuts this year. It is now forecasting an OCR low of 2.55%, which would provide a real boost to borrowers. There are other positive signs for the housing market, with auction sales rates at their highest in two years, driven mainly by improvements in Auckland and Canterbury. Prices remain steady: REINZ reported a 1.8% increase in the national median price and a 4.2% decline in listings year-on-year. The market is generally moving in a positive direction.
All these green shoots suggest that we might be heading for a strong fourth quarter in 2025, and hopefully a return to solid growth throughout 2026.
What’s happening at Zagga?
For investors, with the OCR dropping, now is a good time to assess your earning ability from your funds invested. For property secured, fixed income investments in New Zealand, Zagga have been able to provide some of the strongest, risk mitigated returns this year.
While these will drop in line with the market, they remain well above the average term deposit rate of 3.71% in August.
Our team continue to source a good coverage of loan investments, with borrowers and securities around Auckland, The Coromandel, Mount Maunganui and around the South Island.
The average investors interest rate has managed to stay high at around 8% p.a., though will be tracking down into the 7% range for upcoming loans under assessment.
Demand to fund loans has been extremely strong as usual, with average investment amounts increasing, a sign of confidence from the green shoots mentioned earlier.
As usual we continue to receive a healthy number of loan enquiries from existing and new mortgage advisors and borrowers, however our focus remains strongly on quality over quantity, so bear with us as we continue to work new loan investment opportunities through our credit process.
As always, if you have any questions around new, or current investments, please feel free to get in touch with the team.
