1. Sales down in February - but what does that mean?
Property sales in February dropped 3% year-on-year to 7150. But that was only the second fall in the past 22 months and, with mortgage rates having dropped, I suspect sales will rebound in March.
I expect there will be around 90,000 property transactions in 2025, up from around 82,000 in 2024, off the back of lower interest rates and a (slowly) recovering economy. But with the 30-year average for sales sitting at around 95,000 a year, it might still be 2026 until the market is running at or above normal levels again.
Of course, since many borrowers recently have been on floating or short-term fixed rates, the banks will remain very busy this year with the churn of people needing new loan terms. It will be fascinating to see if/when this wave of maturing loans starts to move back out to longer-term fixed rates again.
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2. The recession is probably over
The economy should respond to lower interest rates and record some kind of expansion in 2025, with last week’s data showing this process might already have started. Stats NZ reported that GDP expanded by 0.7% in Q4 2024, after two consecutive falls of 1.1% in Q2 and Q3. To be fair, the bank economists noted that some changes to the seasonal adjustment process mean that the 0.7% rise may be a little overstated, but even so, it’s still good news.
That said, even if NZ’s recession has now ended (and certainly the timely figures for the first three months of this year have generally been encouraging), it was fairly deep and prolonged while it lasted. In other words, there are brighter times ahead, but the full recovery might be slow. A sluggish (but positive) economic outlook is also cause for caution about the strength of the emerging housing market upturn too.
CoreLogic chief economist Kelvin Davidson: "NZ’s recession was fairly deep and prolonged while it lasted." Photo / Peter Meecham
3. Brighter economic signs
Speaking of those timely figures for the start of 2025, Stats NZ will on Wednesday release the NZ Activity Index for February, with ANZ’s consumer confidence results for March due on Friday. Both measures have been trending gradually higher in recent months, and there’s a good chance this will continue in the next sets of data. Sometimes it’s difficult to know if rising property values are pushing up consumer confidence, or vice versa. But either way, the two measures may well be on the rise in 2025.
4. Watching for another rise in filled jobs
Clearly another important economic indicator when it comes to property is the state of the labour market, and recently the monthly filled jobs measure from Stats NZ has started to rise gradually again – more of the same may well be on the cards for the February figures due on Friday, adding to the prospect of a modest housing upturn.
5. Debt-to-income ratios still lurking in the background
Finally for this week, we’ll get the Reserve Bank mortgage lending stats for February on Wednesday. Aside from the overall flow of lending, the focus will mostly be on the breakdowns of the figures by loan type (e.g. interest-only), loan-to-value ratio, and especially debt-to-income ratio. As mortgage rates drop – and especially the internal serviceability test rates at the banks – the DTIs become a more important factor to watch.
- Kelvin Davidson is chief economist at property insights firm CoreLogic
