Canterbury economy retains its edge despite global shocks

Despite the economic uncertainty created by the latest Middle East conflict, Canterbury remains in a stronger position than most parts of New Zealand and is still well placed to outperform through this phase of the cycle.

With the macro backdrop having become considerably more complicated in a short space of time, that relative strength is a tremendous asset to the outlook for our region.

The New Zealand economy was showing encouraging signs of improvement in the second half of 2025. That picture has abruptly changed with the current Middle East regional conflict.

The sharp rise in oil prices is affecting us all at the fuel pump. On the interest rate side, two-year and five-year swap rates have also moved materially higher, rising from 2.95 percent and 3.51 percent before the conflict to around 3.61 percent and 4.16 percent respectively in the fourth week of the conflict.

This has made the interest rate outlook less clear than it was only a short time ago. Investors had started to gain more confidence around where debt pricing might settle, and while the current conflict has disrupted that line of sight, there is still reason to believe this may prove temporary. The underlying fundamentals of the New Zealand economy have been improving and the Reserve Bank’s message this week suggests it is looking through short-term supply shocks unless they begin to drive inflation expectations materially higher.

However, the growth outlook has also softened and against the overall backdrop of renewed uncertainty, some commercial property investors are again taking a more cautious approach in the near term. At the same time, it’s worth considering that New Zealand’s relative stability is gaining appeal as a safe haven for offshore capital during a period of geopolitical uncertainty. If the current crisis proves temporary, the commercial property market should be well placed to regain momentum given the improving domestic fundamentals already in place.

CBRE’s 2026 Asia Pacific Investor Intentions Survey uncovered an improvement in buying intentions across most markets this year, with over 57% of respondents across the region indicating their preference to buy more real estate in 2026. 

In New Zealand, retail investment sales are undergoing a surge in activity and the office sector is expected to see increased demand - two key investment themes which CBRE Research explores in its just-released 2026 New Zealand Market Outlook. 

Canterbury still leads nationally

Canterbury enters the current period of uncertainty from a position of relative strength nationally. According to the latest ASB Regional Scoreboard, Canterbury ended 2025 on top again for the second consecutive quarter (placing number one in three quarters of 2025), and outperformed the country in nearly every economic metric the bank tracks.

Dairy continues to perform well and positive jobs growth has supported the housing market, retail spending and consumer confidence. The South Island’s structural advantage backed by primary industries remains a key reason we expect the South Island to outperform the North Island through this phase, even with the international backdrop becoming more volatile.

That resilience is particularly important in a market like Christchurch, where smaller business failures and changes in occupier demand can have a proportionally larger effect on vacancy and sentiment. However there is still pressure in the system. Inland Revenue stepping up collection activity on overdue GST and employer debt is adding stress to business cashflows and corporate insolvencies remain a feature of this stage of the cycle. Businesses and households are both still feeling the squeeze. This could lead to more sales activity and rising vacancy in parts of the commercial property market, especially at the smaller-scale end.

Christchurch’s ongoing momentum as a sought after place to visit, live, work and invest continues to build, supported by major projects, a stronger visitor economy and evidence of occupier demand in the CBD. Te Pae has continued to support the visitor and business events economy, while major new facilities are adding to the city’s draw. Electric Avenue attracted around 95,000 attendees, and the much-anticipated opening of One NZ Stadium is expected to provide another huge lift to retail, hospitality and accommodation spending across the city. Parakiore, our new world class aquatic and sports facility, is also attracting further national events to the city.

While the effect of increasing fuel costs on air travel is already evident with Air NZ cutting some international flights, we believe Christchurch is now firmly positioned as the gateway to the South Island, with new direct services and seasonal routes aiding the ongoing tourism recovery.