Feature article
2025 significant economic and property news so far
Economist weighs in on the 10 most recent events
1. Mortgage rates have continued to drop but the biggest falls might be behind us
Most if not all banks now have some kind of fixed rate at a longer term (say 2-3 years) for less than 5%, and with the official cash rate set to fall further, there’s scope for mortgage rates to drop again too. But they’ve already fallen significantly, and it’s possible further changes might be slow/small.
2. Global conditions remain uncertain and inflation risks are worth watching
Trump’s tariffs and uncertainty about various global conflicts (e.g. Ukraine) have the potential to somewhat push up inflation a bit in the near term – which may not cause any increases in our cash rate, but could possibly limit further falls.
3. Weighing up floating/short-fixes versus longer-term rates
Recently many new and existing borrowers have been preferring to stay at the short end of the curve, as they look to benefit from a falling rate environment. But at some stage this year, and with longer term fixed rates already below 5%, there may be a tricky choice coming up for some people.
4. Little near-term effect from Adrian Orr’s resignation
The most recent RBNZ Governor’s surprise departure shouldn’t change the economic or interest rate outlook too much for 2025, given he’s only part (albeit the top person) of a wider committee that sets rates.
5. Buyer’s market could prevail for some time yet
The stock of listings available on the market remains at multi-year highs and even though it’ll probably start to fall this year, buyers should continue to see plenty of choice for a while yet.
6. But property values could begin to rise more consistently
Despite a lot of listings, the CoreLogic Home Value Index for February showed the first meaningful national rise in property values (0.3%) since January last year. It’s nothing major yet and we don’t expect a new boom. But the downturn does seem to be over.
7. Sales volumes to rise and all buyer groups to purchase more properties
We anticipate that lower mortgage rates could drive up sales volumes from around 80,000 in 2024 to 90,000 in 2025 – allowing all groups to do more deals. However, after a couple of record years, first home buyers’ % market share may drop a bit, and investors & movers could rise.
8. Debt to income ratio limits will at least become ‘part of the conversation’
As serviceability test rates at the banks drop, more people may find themselves having to weigh up the impact on their borrowing ability of the DTI rules. But we don’t expect the DTIs to scupper the recovery altogether; rather they’re likely to just linger in the background, keeping a subtle lid on things.
9. Rents to remain fairly flat for a while yet
With net migration trending downwards and the supply of available rentals on the market elevated – as well as the fact that rents are already high in relation to tenants’ incomes – there’s a fair chance that rents could be flattish for the next little while (after a previous period of solid growth).
10. Builders to have a slightly better year
After a long and deep downturn in construction activity, there are now clearer signs that the sector is bottoming out. And lower interest rates should help activity to edge up in 2025, or at least not fall any further.
So that’s my wrap-up of recent events and things to keep an eye on. In big-picture terms, it now looks like the downturn in prices is over, but the ‘recovery’ in the next 6-12 months could be pretty slow and variable across the country.
Author
Chief Property Economist, Cotality - cotality.com
Kelvin joined Cotality (previously CoreLogic) in March 2018 as Senior Research Analyst, before moving into his current role of Chief Economist. He brings with him a wealth of experience, having spent 15 years working largely in private sector economic consultancies in both New Zealand and the UK.
In his role with Cotality, Kelvin’s focus is on keeping up to date with what’s going on in the property market and continually finding different ways for viewing and interpreting it. Kelvin’s economics background means that he knows his way around a spreadsheet, but more importantly he always puts more emphasis on providing the key insights and telling a story, whether his audience be clients or the media.
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