New Zealand Real Estate Market Outlook 2025

The current market landscape presents a promising outlook for existing assets, with replacement costs significantly outpacing current values, indicating strong medium-term value growth. Proactive asset management and well-judged capital expenditures are turning around occupancy and rental performance in previously challenging assets.

Location remains a critical factor in attracting lessees and buyers, with prime locations offering broader amenities and proximity to public transport proving particularly appealing.

The RBNZ's recent monetary policy review, which included a 50bps reduction in the cash rate, underscores a commitment to lower short-term interest rates, setting a favorable backdrop for investment. We anticipate yields to firm moderately in 2025, with Prime yields expected to decline from their peak of 6.85% in mid-2024 to 6.50% by December 2025.

Investor interest in office assets is rebounding across APAC, while retail investment is gradually gaining traction. As supply peaks and the economy recovers over the next 18-24 months, occupancy rates are set to improve. Hybrid working's impact on office space is stabilising, and logistics companies are increasingly confident about their space requirements.

Yield movements are poised to positively influence investment returns in 2025, with rents expected to contribute to capital returns by 2026, leading to double-digit total returns.