1. Where does the housing market stand four months into the year?
Given that the normal February/March peak season for listings and sales has now passed (due to resume again in spring) it’s a good time to assess where the housing market currently stands so far in 2025. Clearly, mortgage interest rates have fallen a lot in the past 6-9 months and may well drop a bit further yet too, and this is supporting growth in property sales and values. The CoreLogic Home Value Index, for example, rose by 0.4% in February and 0.5% in March. First-home buyers remain active, and we’re also seeing mortgaged investors make a comeback too.
But I also think it’s still fair to assume that the emerging upturn will be modest, both by the standards of previous growth phases and also how far we’ve fallen since late 2021/early 2022 (national median values are still down by around 16%). After all, the economy and labour market are hardly roaring away, and the US tariffs are a cause of extra uncertainty. Meanwhile, although lower interest rates mean borrowers can technically afford larger loans, we’re also now hearing that the debt-to-income ratio restrictions are taking over for some people and keeping a lid on loan sizes.
All in all, there are both supports and restraints for the housing market in 2025, suggesting that a modest rise in values of perhaps 5% remains on the cards this year.
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2. Better economic news, with caution
Turning to the economy, there was some decent news last week, with both the NZ Activity Index and ANZ’s consumer confidence measure rising. Of course, you can’t talk about the economy right now without a few words of warning. First, the US tariffs could mean that any emerging recovery in NZ will be slower than otherwise might have been the case. And second, ANZ’s data was a timely reminder that we need to keep an eye on inflation indicators (after the CPI accelerated to 2.5% in Q1), with households’ inflation expectations rising to the highest level in nearly two years.
CoreLogic chief economist Kelvin Davidson: "A modest rise in values of perhaps 5% remains on the cards this year." Photo / Peter Meecham
3. How are firms viewing the tariffs?
Looking ahead, this week will reveal more insights into how the business community is perceiving the effects of the tariffs, with ANZ’s business confidence survey for April due on Wednesday. It’ll obviously be worth watching the headline sentiment measure (which seems quite likely to drop), but just as interesting will be the responses around firms’ input costs, expected output prices, and overall inflation expectations. The Reserve Bank will certainly be watching for any hints that upside risks to global inflation might be filtering into NZ’s business sector.
4. Keeping a close eye on DTIs
Another fascinating dataset due out this week will be the Reserve Bank’s March lending figures on Tuesday. The headline gross lending figure is likely to have risen again, but my main focus as per usual will be on the breakdowns of the data; by loan type (e.g. house purchase or bank switch), repayment type (e.g. interest-only), and the splits by loan to value ratio and debt to income ratio. With recent news that the banks have lowered their internal serviceability test rates even further, it wouldn’t be a surprise to see another increase in the share of lending going out at a high DTI.
5. Better news slowly arriving for house-builders?
On Friday, Stats NZ will publish the data on new dwellings consented in March, and although the long downturn now seems to have been arrested, it may still be too soon to expect an upturn to have started. But with mortgage rates lower, there may be better news for builders later in 2025.
- Kelvin Davidson is chief economist at property insights firm CoreLogic
