NZ Economy Still in Recession: Why That’s Good News for Property Investors

The NZ Economy is still in a recession, but this could be good news for property investors.

GDP Data Confirms Recession Is Ongoing

Stats NZ’s latest GDP figures have confirmed what most households and businesses have felt for some time: the New Zealand economy is still stuck in recession.

According to the data, the economy shrank by 0.9% in the June quarter, not even remotely in line with expectations from the Reserve Bank and major bank economists who were forecasting a smaller contraction of -0.3% GDP rather than the -0.9%. On an annual basis, GDP has been flat. In other words, the size of our economy today is about the same as it was a year ago so there’s been no real growth.

This is disappointing but not overly surprising. The latest release paints a picture of an economy that keeps stalling just when it looks like things might improve.

And while that might sound like bad news, it could actually signal an important turning point, especially for property investors.

A Stop-Start Recovery

The GDP result is a classic case of a false dawn. Earlier this year, things seemed to be turning around. The economy grew 0.5% in the December 2024 quarter and a stronger 0.8% in the March 2025 quarter. That run of two consecutive positive quarters had many thinking the worst was behind us.

But momentum faded fast. Manufacturing slipped back into contraction during May and June, and services, which make up the bulk of our economy, weakened further. Business surveys like NZIER’s Quarterly Survey of Business Opinion also showed a lack of confidence and subdued activity.

The housing market, usually a key driver of growth, has also been soft. Fewer new builds are underway, and the “wealth effect” from rising house prices, which normally boosts consumer spending, hasn’t been there. Together, these factors dragged overall GDP backwards.

Why the Reserve Bank Changed Course

The weak June numbers are one of the reasons the Reserve Bank (RBNZ) pivoted in August. After months of trying to keep interest rates high to tame inflation, the RBNZ finally acknowledged the economy needed help.

The Official Cash Rate (OCR) now sits at 3%, still considered “neutral,” meaning it neither stimulates nor restrains growth. However RBNZ has signalled further cuts ahead, with a potential new low for the OCR of 2.25%.

That may not sound like a big shift, but that implies mortgage rates could fall by another 0.75% and that makes a real difference.

When the OCR drops, banks lower mortgage rates. Lower borrowing costs reduce household stress, free up cashflow, and encourage spending. Businesses also find it cheaper to borrow, making investment more appealing. This is how monetary stimulus works, and why property investors should pay close attention.

Why This Matters for Property Investors

Falling interest rates almost always play a critical role in turning property markets around. Here’s why:

• Cheaper mortgages: With rates coming down, servicing a loan becomes easier. This improves affordability and opens the market to more buyers.

• Confidence boost: Lower repayments give households more breathing room, lifting sentiment and confidence.

• Cycle timing: Property markets tend to bottom out during or just after recessions. Once rates fall and confidence rebuilds, history shows housing often leads the recovery.

We saw this after the Global Financial Crisis, after the early 1990s downturn, and again after COVID-19 disruptions. Each time, housing activity was among the first sectors to rebound, and investors who acted early reaped the rewards.

Forward Looking: Signs of a Rebound

Although the June quarter shows contraction, the future may not be as bleak as the headlines suggest. Forward looking indicators already point to a rebound in the September quarter. Consumer spending is showing signs of stabilising, and with rate cuts feeding through, households should feel more confident in the months ahead.

Exports also remain strong, which provides a cushion for the economy. While uncertainty around global trade and tariffs has been a drag on confidence, the fundamentals of New Zealand’s export sector are intact. That matters for employment and incomes, which in turn support housing.

Another important factor is migration. New Zealand’s population growth, particularly in Auckland and other major centres, continues to put pressure on housing demand. Even during slow economic periods, that underlying demand doesn’t disappear.

Why Timing Is (Almost) Everything

So, what does this mean for investors right now? The key is to look beyond today’s weak GDP print and focus on the bigger picture.

Historically, the best property opportunities have come at times when the economy looks soft but the policy response, in this case, lower interest rates, is already in motion. The latest GDP result will add further pressure to RBNZ to reduce the OCR sooner.

These moments are often the bottom of the cycle, when economic confidence is low yet property prices are more affordable than they have been for years.

By the time the rebound in the property market becomes obvious, much of the easy gain has already been made. Investors who wait until the headlines turn positive often find themselves paying more and facing stiffer competition.

That’s why today’s GDP release, while negative on the surface, can be seen as a green light for forward thinking investors. It shows we’re still in the trough of the cycle, but also that conditions for the next upswing are being put in place.

The Investor Takeaway

The economy is still in recession. GDP is flat. Manufacturing and services are weak. The housing market hasn’t fired up yet. That’s the bad news.

The good news is that interest rates are falling and now look set to fall further and quicker than RBNZ previously implied. We know that an improvement of confidence will follow, and the September quarter early indicators already look set to show improvement. The property market has historically been one of the first to benefit when cycles turn, and we believe this time will be no different.

At Staircase, we see today’s GDP release as a reminder that timing is crucial. Those who act when the outlook feels uncertain are often the ones best placed when the rebound arrives. The bottoming out of GDP, combined with falling interest rates, strongly suggests the property cycle is setting up for its next upswing.

The opportunity is there for those ready to take it.

If this article resonated with you, and you would like to have a chat to know what your options are, feel free to book a free strategy session with our team.

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