From recession to recovery: will 2025 be better? A comprehensive look at New Zealand’s economic outlook for 2025!
The latest CoreLogic data shows that the national median house price edged down 0.2% in the final month of 2024. Although this was the ninth consecutive monthly decline, the modest adjustment broadly reflected the housing market’s direction throughout the year, as high interest rates and a weak labour market continued to push prices lower.
From a subdued finish to signs of recovery
The latest CoreLogic data shows that the national median house price edged down 0.2% in the final month of 2024. Although this was the ninth consecutive monthly decline, the modest adjustment broadly reflected the housing market’s direction throughout the year, as high interest rates and a weak labour market continued to push prices lower.
However, positive signs are also emerging: as mortgage rates fall, the market correction may be nearing its end. For example, house prices have begun to recover in Hamilton, Tauranga and Dunedin, while smaller cities such as Whangārei and Napier have also recorded modest gains. However, Auckland and Wellington remain subdued, with median house prices 20%–25% below their peaks. In Wellington in particular, the flow-on effects of public sector job cuts have heightened uncertainty in the economy and housing market.
These figures send a key signal: although 2024 showed the market gradually returning to more rational conditions, the housing market will still face considerable uncertainty and challenges in 2025.
Borrowers’ preference for short fixed terms emerges
Over the holiday period, the Reserve Bank of New Zealand released mortgage lending data for November. Total lending reached NZ$7,400,000,000, up NZ$900,000,000 year on year, continuing the recent growth trend. Low-deposit lending and lending at high debt-to-income ratios remained within controlled limits. More interestingly, the share of floating-rate lending rose sharply from 11% in October to 14% in November, its highest level since mid-2020. This suggests borrowers are still hoping fixed rates will fall further and want to lock in promptly when the time is right. Meanwhile, loans fixed for more than 12 months still accounted for less than 20%.
Risks and responses in 2025
As 2025 begins, the global economic outlook appears increasingly difficult to read. On the one hand, the world’s largest economy is being steered by a returning leader whose leadership style could cause policy instability, or even trigger a chain reaction of ‘blame’, ‘retaliation’ and ‘punishment’. On the other, geopolitical tensions, intensifying climate change and global economic volatility all add uncertainty to the new year.
These risks will inevitably be reflected in global capital markets and spill over into New Zealand’s economy. For example, heightened risk could keep interest rates volatile, while yield-dependent investments such as property could face greater valuation pressure. As an open economy centred on exports and tourism, New Zealand must also contend with uncertain global demand.
How will we respond to the challenges of 2025?
2025 will be an important year of economic adjustment for New Zealand. The property market may continue to consolidate, the labour market will take time to recover, and the effects of climate change are becoming more pressing. Climate risk has become a factor that investment decisions cannot ignore: will investors continue to buy homes on floodplains? Can society still afford the losses from these high-risk investments? These questions challenge insurers and banks while placing greater demands on the government’s policymaking capabilities. Meanwhile, a widening public budget deficit and declining public tolerance for risk pricing could prompt policymakers to reconsider the balance between economic development and environmental protection.
Despite the many challenges, 2025 still holds opportunities. Core sectors including property, agriculture, tourism and education remain pillars of New Zealand’s economy. Lower interest rates could also create favourable conditions for business investment and household spending, providing momentum for recovery. Above all, finding certainty amid uncertainty will require both government policy direction and a collective effort across society.
What are your predictions for 2025?
As the new year begins, how do you think New Zealand’s economy will perform in 2025? Which sectors will be the winners? Which risks deserve particular attention? We invite you to join the discussion and leave your predictions below as we explore New Zealand’s future direction together.