New Zealand’s economic recovery is “just around the corner”: that’s the conclusion of a survey of 1,400 local businesses. Respondents were cautiously optimistic, especially in the regions. Among the various sectors, freight, professional services and agriculture were the most positive about the year ahead. “This relatively optimistic view is broad-based,” the report notes, adding that, “with the exception of construction and retail, all significant sectors have seen a notable improvement.”
Optimism in the agricultural sector is backed up by the latest trade data: billions in milk, meat and fruit were sold overseas. Exports are going gangbusters, with four months in a row of trade surpluses, which is enormously encouraging for our local economy. It’s also the primary sector that helped New Zealand achieve an unexpectedly strong 0.8% growth in GDP for the first quarter of the year.
Will the OCR drop further next week? We might see another 0.25% decrease, or, more likely, the RBNZ will sit tight and wait to see what happens. Either way, this year’s lower interest rates have now flowed into the markets. This means those with mortgages have a little bit more cash to spend, while savers aren’t getting much joy from their term deposits.
And while house prices remain generally flat, sales activity is up 15% on the same time in 2024, according to BNZ’s chief economist. This is part of an overall recovery in the housing market, albeit a “glacial” one.
All those extra property transactions though, are leading to further delays in bank loan processing times, with one real estate agent telling RNZ that buyers should allow 15 working days to get their loan approved.
What’s happening at Zagga?
These signs of optimism have flown through to increased lending at Zagga and as investors will know, it’s been a busy few months.
We’ve seen a range of loan purposes from quality borrowers, including those who are now looking to start new developments, complete renovations on properties to sell, or holding residual stock of newly constructed properties while waiting for property prices to creep up.
With the lower OCR comes increased lending and investment opportunities but also lower returns for investors.
While interest rates will vary from loan to loan, Zagga remains competitive in the market, with average rates to investors still sitting around 7.5%. However, our investors should be prepared to see those rates drop slightly in the near future as we continue to review them.