Economist predicts modest economic recovery and real estate movements in 2025
As the year closes, Tony Alexander (pictured above) shared his last economic insights of 2024.
The past few years have seen financial declines for many, but the new year might bring some relief, albeit with modest expectations for falling interest rates, Alexander wrote for OneRoof.
Limited relief from interest rates
The decrease in interest rates might not be as beneficial as some hope.
“Borrowers will be lucky if more than another 0.5% comes off fixed mortgage rates for periods of two years and beyond,” Alexander said, suggesting only slight decreases in shorter-term rates amid ongoing inflation risks.
These risks include businesses feeling the need to raise prices significantly once consumer spending stabilises.
Spending and inflation trends
Alexander highlighted a surge in consumer buying intentions, the highest in three years according to his monthly Spending Plans Survey.
However, with unemployment expected to rise, consumer caution may delay any significant recovery in retail spending and business profitability.
Global influences and fiscal policies
2025 might see new challenges stemming from international trade tensions, particularly with changes in US leadership and its trade policies.
These factors, along with China’s strategic market shifts and continued fiscal restraint, are expected to impact New Zealand’s economic growth and inflation rates.
Real estate market outlook
The real estate market is likely to see only mild improvements.
“Prices look like they could rise just north of 5% through the year while sales volumes climb higher,” Alexander said.
However, the increase in property listings, new financial regulations, and ongoing debt servicing challenges will temper buyer enthusiasm and market activity.
Anticipated economic landscape for 2025
Alexander foresees 2025 as a year of gentle economic recovery, with slight reductions in interest rates and modest gains in the real estate sector.
Despite potential global and domestic challenges, there might be some positive shifts due to increased infrastructure spending and potential surprises in standalone house construction.
Read Tony Alexander’s insights on OneRoof.
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