Local Recovery Solidifies, While Global Uncertainty Continues

Hi all,

May is virtually here already, and so it seems that the year is moving along at a pace. It continues to be a very interesting trading environment for everyone, regardless of sector. So what are we seeing?

Inflation and cost of borrowing increases. These are the two things that are currently dominating our landscape.

But, how is this impacting Zagga and our investors / borrowers?

Starting with the cost of borrowing. With OCR increases, and a genuine slow down in the main trading banks’ funding, there is simply less capital readily available. And what is there is now more expensive. As a result, over the course of the last 6 months we have seen a steady increase in the cost of borrowing. We are also seeing that a large number of extremely credit-worthy borrowers looking for finance for totally acceptable purposes (with great property as security and low LVR’s) are currently struggling to find finance. Again, this all serves to push prices up. Tough for borrowers obviously, but clearly provides an opportunity for investors to increase their return which, with inflation where it is, provides welcome relief.

Inflation – it is certainly high. So, we are finding that those investors who are used to investing in Zagga loans are tending to want to keep their money in loans. They like the increasing returns they are getting and the fact that it is keeping them well ahead of inflation, and providing a monthly income. This seems to be ensuring that we are finding new investors eager to invest in loans every day. It has meant that there is a little more concern, particularly when investing into anything construction related, that the borrower they are investing in has sufficient contingency built into a loan to manage escalating costs. But, we are certainly mindful of this also, and so too our borrowers seem accepting of this requirement.

While all of this meant that there was a little bit of investor uncertainty a month or so ago, this uncertainty seems to now have been reduced with a strong appetite to get into 12-month loans where the LVR is not too high. So, confidence in the underlying asset (1st mortgages over NZ property) seems to still be there.

Regardless, it is a very interesting time for the market and I am sure that we will continue to see twists and turns before 2022 is out.

As ever, feel free to reach out if you have questions.

Regards,

Marcus

The latest GPD data is out, and at 0.2% growth in the last three months of 2025, it’s risen for three out of the past four quarters. We’re into annual growth for the first time since the third quarter of 2024, which is a hopeful signal that local conditions are improving.

The latest data shows solid increases in retail and accommodation sectors, finance and insurance, media and comms, and arts and recreation. Construction under performed, but data from January and February 2026 looks more positive for the sector, so overall the picture here in New Zealand is encouraging.

The looming concern is the global oil crisis, and the headlines seem alarming. But we’ve been reading some pretty frightening headlines every week since 2020, and we all just keep on going. What can you do in these uncertain times? The best advice is not to panic. If you have an investment strategy that’s taking you toward your financial goals, stay calm and talk to your adviser before you make any sudden moves. As ASB’s analysts point out, “the average conflict results in a very short-term drawdown of roughly 5% (using the S&P500 as a proxy), with the market recovering its losses over an average of 47 days.”

In the longer term, this fuel crisis might have an upside. If it encourages a faster shift to renewables, that will improve New Zealand’s energy security and make us less vulnerable to these oil shocks in future. ANZ is reporting more interest in EVs, and BYD says it’s had a bumper few weeks. The national grid reached a record high of 96.4% renewable in the latest data, a new record, so the decarbonisation megatrend is continuing its onward march here in New Zealand.

In response to the picture both here and abroad, the big banks have been nudging up their interest rates, leading to higher returns for savers. Term deposit rates are up marginally, but still below 4%. Returns on Zagga loans have also stayed steady, and have been consistently paying around 7%. We’re seeing rapid uptake on new opportunities, and we expect this continue throughout 2026 – particularly as momentum grows in the construction sector.

We’ve seen a noticeable increase in both the volume and quality of loan investments coming through this month, and we’re excited to be bringing these new opportunities to our investors. With strong demand and quick uptake on new listings, it’s important to be prepared so you can take advantage of opportunities as they become available.

Local Recovery Solidifies, While Global Uncertainty Continues

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