“What seems to us as bitter trials are often blessings in disguise.” — Oscar Wilde
Chaos offshore, improved stability at home
2025 is shaping up to be an interesting year already, economically speaking.
The S&P500 has fallen around 10% from its February peak, the result of turbulent global economic conditions. Here in New Zealand, our economy gets buffeted around by the world’s currents, and the NZX has also fallen in response to volatility across the globe.
But it’s not all bad, because local indicators are definitely looking up. Our GDP turned positive in the fourth quarter of 2024, growing by an unexpectedly decent 0.7%. The biggest boost came from the agricultural sector, led by record high dairy prices.
Economic recovery is being supported by falling interest rates, with indications the Reserve Bank could make two further 0.25% cuts in April and May, bringing the OCR down to 3.25% within two months. That will help borrowers, who should have more cash to spend on retail and hospitality.
The construction sector is taking longer to bounce back, and the housing market is still flooded with listings. Sales are up slightly on last year and values seem to have turned the corner.
One final note: from 1 April, investors can now claim 100% of interest deductions on rental properties. This means new builds no longer have a tax advantage over existing properties, and property investors will pay less tax. Will this encourage Kiwis to buy more residential rentals? Only time will tell.
What’s happening at Zagga?
We’re starting to see developers reappear—some waiting for interest rates to settle before launching new projects, others looking to fund their way through the lull while the market firms up.
The projects coming through are high quality, from borrowers we’re keen to back—whether it’s funding small developments or bridging finance to help bring stock to market.
Recent loan-to-value ratios have hovered around 65%, with returns in the ballpark of 8% per annum for terms under 12 months. We expect rates to shift slightly lower, likely settling in the high sevens—still well above term deposit returns.
On the funding side, demand from investors has been strong. Many of our loan investments have been taken up quickly. To help level the playing field—especially on smaller loans—we’ve been trialling pre-release notifications. The response so far has been mostly positive, with some helpful suggestions we’ll continue to explore.
In the pipeline: two new short-term construction loans nearing the final assessment stage, plus a number of other applications progressing through documentation. We expect the pace of new opportunities to pick up from here.
We’d Love to Hear from You
We’re always keen to hear what you’re seeing in the market—whether you’re investing, developing, or just watching closely. If you have insights, observations or forecasts you’d like to share, we’d welcome them.
Feel free to send us your thoughts, whether confidentially or anonymously. With your permission, we may include a selection of these perspectives in our next market update—without identifying the author, but capturing the sentiment and discussion.
As always, if you’ve got questions—whether about investing or borrowing—our team is on hand to help.
