Local Recovery Solidifies, While Global Uncertainty Continues

For the first time since November 2021, the REINZ House Price Index showed a month-on-month improvement between May and June. It was only a tiny improvement of 0.6%, but the change of direction is welcome. Hopefully this is a sign that prices have at least stopped falling, even if they’re not yet starting to rise again.

Zagga has seen a significant increase in loan enquiries from brokers after a more subdued start to the year. This suggests that developers and homebuyers are looking at the horizon with optimism and a bit more certainty. Combine that anecdotal evidence with the high migration rates, rising incomes and potentially falling interest rates in 2024, and it all adds up to a feeling of greater confidence in the housing market.

Interest rates may be peaking

Our official cash rate (OCR) stayed on hold at 5.5%, and with inflation at a slightly improved 6%, it is likely to stay there at least until the election. One economist is predicting a debate about cutting the OCR will dominate toward the end of the year and into 2024.

Right now, with banks stress testing loans at 9% or more, difficulty in securing lending remains a major handbrake on sales activity and prices. Lower interest rates, more than any other factor, will contribute to rising house prices. But rates are forecast to fall slowly when they do start falling, so the impact will be gradual, not dramatic.

October’s election could provide a kickstart

Traditionally, everyone sits on their hands in the lead-up to an election and this year looks to be no exception. Markets don’t like uncertainty. Once the election is over, deferred investment decisions are often made, and not only if the result goes a certain way.

We can probably expect to see a boost in investor confidence once the election is over, and this may translate into a livelier spring/summer housing market. If National wins, it plans to introduce (or reintroduce) policies that are friendlier to property investment, which may reinvigorate the landlord market.

Strong migration means Auckland is likely to move first

The Auckland housing market has seen one of the largest peak-to-trough price drops, down around 20%. However, it’s Auckland that will benefit the most from the unexpectedly high immigration we’ve seen in 2023. Although many Kiwis are leaving, the net inflow for the year ending May 2023 was 78,000.

Migrants tend to prefer to move to Auckland where the number of job listings is at its highest, which will put upwards pressure on rents and, ultimately, house prices. This may help Auckland house prices to rise first, leading the recovery for the rest of New Zealand.

One survey of real estate agents indicated that the tide is already turning in Auckland.

“Auckland is already back into a seller’s market with a net 4% of agents operating there saying that buyers are now the weaker party in negotiations,” wrote economist Tony Alexander in one of his recent economic updates. “Queenstown Lakes and Dunedin areas are in a seller’s market also.”

Rising house prices drive our economy

With higher incomes, strong immigration, lower interest rates and falling inflation, it’s probable that house prices will start to rise. This rise will probably be slow, but steady. Rising values give homeowners more confidence, leading to higher consumer spending and stimulating the whole economy. Whether the New Zealand economy should be so influenced by the housing market is a matter for debate, but for now it is – so its imminent recovery is good news for pulling Aotearoa out of its technical recession and boosting local businesses in 2024 and beyond.

You can’t time the market. But with house prices seemingly at a turning point, property looks well-priced. Once again, real estate seems ready to proves its credentials as an excellent long-term investment, even if the short-term volatility can make for a stressful ride along the way. 

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.