As we approach 2025, there’s a renewed sense of optimism in the New Zealand property market. With lower interest rates, improving debt serviceability, and increased buyer confidence, the stage is set for a steady and positive year ahead. Here’s what you can expect in 2025 and why it could be the perfect time to take action, whether you're a first-home buyer, investor, or homeowner.
House Prices Are Set to Rise
Economists are forecasting house price increases of up to 8% in 2025, driven by falling interest rates and a more stable economic environment. After a period of price corrections, the housing market is regaining momentum, with activity expected to pick up significantly next year.
Westpac’s Senior Economist, Satish Ranchhod, predicts an 8% rise in 2025, followed by a further 5% increase in 2026. This rebound comes as inflation is brought under control, and the Reserve Bank continues to reduce the Official Cash Rate (OCR). With the OCR expected to drop to 3.5% by the end of 2025, borrowing costs will become more manageable for many, encouraging more buyers to enter the market.
Lower Interest Rates: A Game-Changer
The Reserve Bank’s efforts to stabilise the economy are already bearing fruit. Recent OCR cuts, with more expected in the coming year, are driving down mortgage rates. While one-year mortgage rates may settle around 5.4%, these reductions still offer significant savings for borrowers.
For existing homeowners, this creates an excellent opportunity to refinance at lower rates, potentially freeing up cash for renovations or investments. First-home buyers and investors can also benefit from more favourable lending conditions, making it easier to secure the funding needed to enter the market.
A Boost in Market Confidence
The property market has been in a “holding pattern” for much of the past 18 months, but that’s set to change. Lower interest rates are sparking renewed confidence among buyers. First-home buyers, in particular, remain active, taking advantage of good listings before prices climb higher.
Investors are also showing increased interest, with many drawn by rising rents and improving yields. As Kiwibank Chief Economist Jarrod Kerr notes, "Interest rate cuts fuel confidence, and confidence generates activity." This resurgence in activity is expected to create a more dynamic and competitive market in 2025.
Opportunities in a Changing Market
While economists are optimistic about price growth, the market is still accessible. With house prices more sustainable after recent corrections and interest rates trending downward, 2025 could be a golden opportunity to:
Buy Your First Home: Take advantage of lower rates and get on the property ladder before prices rise further.
Upgrade Your Property: Use increasing equity and favourable lending conditions to move into your dream home.
Invest Wisely: Rising rents and stable market conditions make now a great time to explore investment opportunities.
Looking Ahead: What’s Next?
While 2025 holds plenty of promise, it’s important to think long-term. Economists point to slowing population growth as a factor that could temper price increases in later years, particularly in 2026 and 2027. For now, though, the combination of lower interest rates and improving market confidence makes this an ideal time to make your move.
Final Thoughts: Act Now to Stay Ahead
With house prices on the rise and interest rates on the decline, 2025 is shaping up to be a strong year for the property market. Whether you’re buying your first home, upgrading, or investing, acting now could put you ahead of the curve.
Ready to explore your options? Let’s chat about how we can help you secure a competitive home loan and take full advantage of these favourable market conditions.
Get in touch today to start your 2025 property journey!
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