1. Inflation still just about under control
As expected, the headline CPI inflation rate rose from 2.2% in Q4 2024 to 2.5% in Q1 2025, with non-tradable prices slowing (such as insurance and rents) but the tradable component becoming less favourable, rising from -1.1% in Q4 to +0.3% in Q1. On one hand, there’s not too much to be stressed about here. After all, inflation rate is still within the Reserve Bank’s target of 1-3%, and in a central scenario it should dip back towards 2% again in the near term. Indeed, part of the rise in Q1 was just due to a technicality about how fee-free tertiary education programmes are measured.
The Reserve Bank will be watching the numbers very closely and will no doubt be wary of cutting the Official Cash Rate too fast or far in the coming months – especially if the US tariffs push down the NZ dollar and result in a bit more imported inflation. That said, the risks to the real economy are still to the downside, hence an "easing bias" for interest rates.
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2. First-home buyers’ market share drops, but don’t panic!
The latest CoreLogic Buyer Classification data showed that first-home buyers’ share of property purchases dipped from its recent record highs of 26-27% down to 25% in the first quarter of the year, while the comeback by mortgaged multiple property owners (including investors) continues. That reflects rule changes such as mortgage interest deductibility for investors going back to 100%, but also lower interest rates, which have reduced the typical cashflow top-ups on a rental purchase.
However, before pundits start proclaiming the demise of first-home buyers at the hands of investors, there are some things to note. First, conditions remain pretty favourable for first-home buyers, and I doubt these factors will collapse. After all, KiwiSaver is still in play for at least part of their deposit, and there’s still access to the low-deposit lending allowances at the banks too. Moreover, in a busier overall market, first-home buyers are still likely to buy more properties in 2025 than they did in 2024.
3. Sales activity continues to trend higher
Just to ram home that point, consider overall property transactions activity over the first three months of the year – which, measured across estate agents and private deals, was about 5% higher than the same period in 2024. Even though first-home buyers' market share is down year on year, a bigger pie meant they purchased nearly 100 more properties in Q1 2025 than Q1 2024.
CoreLogic chief economist Kelvin Davidson: "First-home buyers are still likely to buy more properties in 2025 than they did in 2024." Photo / Peter Meecham
4. Net migration may have reached a floor
Net migration into New Zealand was about 8800 in March, the highest monthly figure since September 2023, with non-citizen arrivals lifting a bit and Kiwi departures dropping slightly. Now, these numbers can be subject to revisions down the track. But even so, there are hints here that the migration cycle has reached its trough; another reason to think the property market could trend slowly higher in 2025.
5. GDP looks encouraging for Q1
A final one here for the stats boffins. Last week the Reserve Bank launched its own real-time indicator for GDP growth, which relates to the latest quarter for which we don’t have official data yet – at present Q1 2025 (but it’ll switch to Q2 2025 after the Q1 GDP stats are out on June 19). It covers a huge range of timely indicators for the economy, including the confidence surveys, jobs data, dwelling consents, lending activity, migration, and house sales. The key point: it’s currently suggesting GDP growth of around 0.8% in Q1 – a solid result.
- Kelvin Davidson is chief economist at property insights firm CoreLogic
