Falling interest rates are set to stimulate activity in the property market this year.
The Reserve Bank has forecast future cuts to the Official Cash Rate are on the horizon after it began an easing cycle last year.
Gareth Fraser, CEO of Colliers New Zealand, says with inflation now under control following a prolonged battle, a combination of improving economic conditions and the Reserve Bank’s moves will change the dynamics for investors.
“Many people or investment groups who have had term deposits at attractive rates that are now up for renewal will have capital that will be seeking higher returns in 2025,” Fraser says.
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“This will lead to commercial property investment opportunities being more sought-after and many of these opportunities will offer a more attractive income return than term deposits.
“Combined with potential capital appreciation, the total returns on offer in this up cycle will be compelling for some investors. It should also spark renewed interest among residential investors.”
On the residential side of the property market, the Government’s expressed desire to free up planning laws and change the Resource Management Act could lead to more development activity.
“Developers experienced tough conditions last year as projects became tricky to price but if there is a plateau or drop in construction costs there will be increased scope for more developments and there remains a need for housing in many areas across the country.
“There are further discussion points in the background for developers to consider such as development contribution costs, which vary from council to council and can have an impact on the viability of projects.
“Clarity from councils on these contributions and future infrastructure projects would help drive proactive decision-making.”
Build-to-rent developments continue to take shape in different locations across Auckland and will add further stock to the housing market as people seek alternative living options from traditional home ownership models.
Concerns remain about the broader infrastructure picture in New Zealand, which could continue to impact productivity but the region is edging closer to the opening of the City Rail Link.
This major project looms as a gamechanger for Auckland that will help unlock the city and improve connectivity, while driving interest in properties located near its stations.
One key project that Colliers is set to manage in the Auckland CBD through its Project Leaders team is the student accommodation building at 256 Queen Street.
The proposed development will include self-contained studio units with hospitality and retail in the lower floors. Delivery is required by the end of 2027, ready for the 2028 student year.
“This is a project that will inject considerable life into an area of the city that has the potential to be so vibrant. Students will welcome the opportunity to have somewhere to stay that is strategically positioned near Auckland’s universities.”
Looking away from the main centres and in the rural space, Fraser says there is strong potential for growth in 2025 following a lean patch influenced by the Covid-19 pandemic, high interest rates, and extreme weather events.
“Record milk price forecasts and positive signals from the horticulture industry all bode well for an area of the property sector that has gone through a tough time recently.
“The lifestyle property market has drawn strong interest as people mull relocating from cities or look to balance hybrid work opportunities. There has been an impressive offering of stock available in this space during the past year.
“Improving economic conditions that are influenced by lowering inflation and falling interest rates means the country is ready to steadily emerge from a period of recession and the property market is positioned to move into an up cycle.”
- Supplied by Colliers
