1. All about the cash-backs
Last week’s Reserve Bank mortgage lending stats … where do I start? It was a crazy month in the banking sector in December, with total gross lending flows soaring to a new record high of $14.1 billion. To some extent, the surge reflected a rise in property purchases, but the big impetus really came from bank switching (or "refi"). This was $5.8b, more than double the previous high of $2.6b in July.
In turn, that was all about the cash-backs. Back in November, the banks were all offering 1.5% cash-backs, which then fed into December’s strength once the loans had actually been drawn down. But it wasn’t necessarily ‘risky’ borrowers that switched. Indeed, much of the growth in lending came at lower debt-to-income ratios.
Meanwhile, there were also hints that low deposit finance has become a bit more available for investors after the LVR speed limit eased from December 1. At 1.7%, the share of investor lending being done with a low deposit was still fairly muted, but the highest figure in almost five years.
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On the whole, lending activity in December was a story of huge gross churn but not necessarily net growth. Borrowers pocketing the cash will have been the winners, although some banks may have gained market share.
2. Market sentiment switches to cautious optimism
The results of Cotality's latest real estate survey suggest this year will be better for sellers than 2025. Nearly three-quarters of respondents expect house prices to rise in 2026, including 14% who believe prices will rise by more than 5%. Canterbury was the most confident region, but Wellington is still lagging.
I can’t see much to disagree with in those survey results. With housing affordability having improved, mortgage rates down, and the economy recovering, some sort of growth in property values seems likely, with more relocating owner-occupiers looking poised to come out of the woodwork. But potential election-related uncertainty and the lurking presence of debt-to-income ratio caps should keep a lid on activity and prices.
Cotality chief economist Kelvin Davidson: "Nearly three-quarters of respondents expect house prices to rise in 2026, including 14% who believe prices will rise by more than 5%." Photo / Peter Meecham
3. Let’s just stay balanced when it comes to the economy
Broadly speaking, last week’s economic indicators were positive: filled jobs seem to be slowly trending higher, and consumer confidence has lifted; although ANZ’s business sentiment indicator dropped, it remains at a high level. But let’s not forget that this has been a prolonged and painful recession; it may not necessarily be a straight line upwards for the economy, especially since higher household spending on taxes, such as council rates and electricity, will crimp other activity.
4. A better year beckons for house-building in 2026
On Tuesday, Stats NZ will publish figures on the number of new dwellings consented in December. We’ve recently seen a clearer upwards trend now emerging for dwelling consents, and although it may not be a straight line to recovery, the signs look positive for residential construction in 2026. That is another reason to be cautious about the outlook for property value growth, especially since the stock of dwellings has already lifted relative to our population.
5. A flat quarter for unemployment?
Then on Wednesday, Stats NZ will release the official labour market figures for the final three months of 2025. This will be the main economic data for the week, with most expectations being for a flat unemployment rate at 5.3%, with any job growth being balanced by a rise in the labour force (i.e. supply of available workers). We may not actually see the unemployment rate edge down until around the middle of the year, but a slow re-emergence of new hiring activity and a rise in job security in 2026 would tend to support property sales volumes and values to a degree.
