Market Warming Up, But Brakes Not Fully Off Yet

“Despite recent OCR cuts, with more anticipated in coming months, it would appear the economic recovery has not quite gained the momentum many expected,” says Daniel Horrobin, Director of City Realty Group.

While rate drops have sparked optimism, many are still waiting for that to translate into stronger economic activity.

Economist and commentator Tony Alexander observed:

“In the middle of last year, a net 42% of my respondents said they would cut back their spending on things generally in the next 3–6 months. That improved to a net 10% planning to spend more come the December survey and evidence of falling borrowing costs.

But my first survey for the year in February showed a net 10% of consumers planning to cut spending and that has just worsened to a net 15% planning cutbacks. For retailers, the outlook as we head through autumn into winter is still one of constrained customer flows.”

However, there are some encouraging signs. Alexander also noted:

“Only 37% of agents have reported that buyers are worried about access to finance. This is the lowest reading on record and backs up the evidence of competition between banks heating up revealed in some recent discounting of fixed lending rates out to three years.”

Investor confidence is also beginning to re-emerge. The NZ Herald’s headline on 28 February boldly declared, “Investors are back,” helped by the return of 100% interest deductibility for investors from 1 April 2025.

“We remain optimistic in the city that this, along with diminishing deposit returns due to falling loan interest rates, will encourage new investment in our apartment market,” adds Daniel.

There is also more choice for buyers than we’ve seen in some time. “The amount of stock for sale in the central city continues to creep up,” says Daniel, “with numbers approaching the mid-600s — the healthiest we’ve seen for a while.”

This aligns with national trends. The Real Estate Institute reports February had more homes for sale than any February in the past decade.

Tony Alexander, in his early March update, also stated:

“In this month’s survey a net 68% of agents said that more potential sellers are asking them for property appraisals. This is the second highest reading in almost five years and tells us that strong listings stocks are set to continue.”

Real Estate Institute of NZ acting chief executive Rowan Dixon echoed the positive shift, noting:

“Sales have increased nationally year-on-year and activity is ramping up but buyers were not in a rush to purchase. Attendance at open homes remains strong, and auction numbers are comparable to those in February 2024. These are encouraging signs for a positive and confident market ahead.”

“Hopefully another couple of OCR cuts might speed things up,” says Daniel.