Key Indicators Signal Property Market Resurgence
- Staircase Financial
- Apr 18
- 4 min read
In this edition of ON THE MARKET we have GOOD NEWS for all residential property investors. From April 1st you can again claim 100% of your property investment mortgage interest expense!
This has a significant positive impact on cash flow which could offer you the opportunity to grow your property portfolio further. The NZ property market is heating up, and the prospects for strong capital growth are improving daily!
Interest Rate Cuts: Igniting the NZ Property Market
The Reserve Bank of New Zealand (RBNZ) has reduced the official cash rate (OCR) by another 25 basis points to 3.50% on April 9, 2025. This move marks the fifth consecutive rate cut since August 2024, totalling a cumulative reduction of 175 basis points aimed at stimulating economic growth following the recession.
The economy exhibited a modest expansion of 0.7% in the last quarter of 2024, indicating initial signs of recovery. Economists predict that the RBNZ may cut rates again, with nearly 90% expecting an additional 25-basis-point cut in May. These RBNZ interest rate cuts are fueling the New Zealand housing market.
Implications for Borrowers:
Enhanced Affordability: Lower interest rates translate to reduced mortgage repayments, improving investment returns.
Bigger Loans: Low rates boost borrowing capacity, letting you buy higher-value properties. We are now seeing evidence of this in the more expensive property price ranges.
Market Stimulation: Falling rates spark buyer excitement, driving demand and pushing property prices higher in the NZ property market.
What to Do Next:
Prospective buyers should assess their financial readiness and consider locking in favourable mortgage rates. Consulting with a Staircase mortgage advisor can provide personalised insights into how these rate adjustments impact individual borrowing scenarios.
Upward Trend in Property Prices: Indications of Market Recovery
Recent data reveals a positive shift in the New Zealand property market. In March 2025, property prices experienced a 0.5% increase, the biggest monthly gain since January of the previous year. This follows a 0.4% rise in February, confirming a steady upward trend.
Factors Contributing to Price Increases:
Reduced Interest Rates: As borrowing becomes more affordable, buyer demand intensifies, exerting upward pressure on property values.
Economic Recovery: New Zealand’s recovery from the recent recession sparks confidence, encouraging property investment opportunities.
Supply Constraints: Hotspots like the Queenstown property market are in short supply, triggering competitive bidding and higher prices.
Implications for Buyers:
Entering the New Zealand housing market during an upswing requires prompt decision-making to capitalise on current prices before further increases. Don’t miss out!
Reasons To Expect A Surge In Mortgage Borrowing
This month we consider the likelihood of a resurgence in mortgage borrowing to former Boom time levels and how that might impact property prices.
Recovery in New Mortgage Lending
Total mortgage lending hit $5.8 billion in February 2025, up a massive 50% from $3.8 billion in February 2024. This 2025 recovery is stronger than the previous recovery of late 2019 to early 2020. This signals a lending boom that could drive property prices higher soon.
Property Investor Mortgage Lending Recovery Has Commenced
Property Investor lending is also exhibiting the pattern of Recovery. This pattern is similar to the rise in lending to investors in the 2020 Recovery. This suggests a surge in residential property investment is just around the corner.
Large Property Equity + Improved Cashflow = Increases Mortgage Borrowing Capacity
CoreLogic estimates show the housing stock is currently worth $1,630,000,000,000. That’s $1.63 Trillion! On the other hand, the Reserve Bank NZ reveals total mortgages owed of ‘only’ $365 Billion so that implies an overall Loan to Value Ratio of just 22%!
In other words, homeowners have 78% home equity New Zealand, unlocking massive borrowing capacity. Two keys drive this:
Equity
Cashflow
That means New Zealanders have a large amount of potential borrowing capacity if based solely on that significant amount of equity.
Why Equity and Cashflow Matter More Than Ever
Over the past 6 months, falling mortgage interest rates in NZ have boosted cashflow, increasing borrowing power. This perfect storm, huge equity and better cashflow, sets the stage for mortgage borrowing. If just 5% of equity is borrowed, that’s $81 billion in new loans!
We also know from history that when 2-year fixed mortgage rates fall below 5% p.a., mortgage borrowing increases significantly. Most loans go to upgrading homes, buying rental properties, or purchasing first homes.
So now that we have recently evidenced mortgage rates falling to 4.99%, we are equity rich and our borrowing capacity has improved we know what happens next. We can expect more borrowing, possibly a significant surge, to occur in the near future.
How Much More Can You Borrow Now?
You may be pleasantly surprised to learn how much more you can borrow in the New Zealand housing market. Do you know how much your borrowing capacity has increased in the last 6 months due to mortgage interest rates falling so far and so fast?
To find out, contact our Staircase Mortgage Team for a free borrowing capacity assessment. Unlock your property investment opportunities in NZ today! If you want to learn more, visit our Guides and Resources page.
Comments