Squirrel releases property market update for February
2025 starts with new US tariffs and looming OCR decisions impacting NZ's economy and property market, according to Squirrel.
Global trade developments and economic outlook
As 2025 unfolds, significant global economic activities are shaping the market, notably the imposition of new trade tariffs by President Donald Trump.
In early February, the US introduced substantial tariffs on its major trade partners: 25% on both Canada and Mexico, and 10% on China.
These measures are aimed at bolstering US border security and reviving domestic manufacturing, and they have already begun to show effectiveness in negotiations.
Tariff effects and economic repercussions
Despite initial fears of a trade war, recent negotiations have eased tensions, with a temporary pause on tariffs against Canada and Mexico to allow further talks.
However, the potential extension of tariffs to the European Union looms, threatening broader economic implications.
Such tariffs could heighten global inflation and slow economic growth, particularly impacting US consumers through increased costs and sustained high interest rates, thus strengthening the US dollar, Squirrel said.
Impact on New Zealand’s economy
For New Zealand, the repercussions of a stronger US dollar are mitigated by similar currency devaluations among key trading partners. However, the general economic environment remains tepid, with China, a principal trade partner, showing signs of economic weakening.
Squirrel said the overall impact on New Zealand is expected to be moderate unless there are significant shifts in oil prices, which Trump is likely managing cautiously.
Anticipated changes in the OCR
The Reserve Bank (RBNZ) is poised to make its next OCR announcement on February 19, with expectations set for a decrease from 4.25% to 3.75%.
This adjustment follows disappointing GDP figures released last December and aims to steer the OCR towards a neutral rate of about 3% by mid-year.
Housing market and mortgage rates outlook
The New Zealand housing market remains subdued, with current economic conditions and higher interest rates dampening growth prospects.
For mortgage borrowers, the advice is to consider short-term fixes or floating rates until the market stabilises, especially as banks begin to adjust rates post-OCR announcement, Squirrel said.
Mortgage rates are expected to settle between 4.5% and 5%, a stark contrast to the lower rates seen during the COVID-19 pandemic.
Looking ahead
While the property market and economic conditions in New Zealand face challenges, gradual improvements are expected throughout the year. The focus remains on economic recovery and stability, with hopes for a stronger 2026 as confidence and financial conditions improve.
Read the Squirrel report on LinkedIn.
