Other centres like Wellington have remained sluggish
Bay of Plenty has surged to the top of ASB’s latest Regional Economic Scoreboard for the first time in nearly a decade. A strong kiwifruit harvest, steady employment growth, and higher consumer confidence lifted the region ahead of Southland and Otago in the June 2025 quarter. ASB chief economist Nick Tuffley (pictured) noted that while the national economy contracted slightly in the same period, the Bay’s primary sector strength gave it an edge over urban centres.
Tuffley said the overall property market remains sluggish, with Wellington in particular weighed down by weak sentiment and a soft job market. He pointed out that South Island housing markets have held up better than many North Island counterparts.
Auckland’s affordability improves
Auckland climbed five places to fifth on the Scoreboard, helped by stronger retail activity and improving consumer confidence. Tuffley said lower mortgage rates are already making a difference for buyers.
“Auckland is turning around,” Tuffley told NZ Adviser.
“On the plus side we have mortgage rates coming down, which shifts affordability quite a lot. Bank stress test rates are now back below 7%, which is not too far above what they were when mortgage rates were at their lows back in 2020-21. That’s really going to help people’s ability to buy a home in Auckland.”
He added that job growth remains weak and migration is easing from 2023 highs, which will limit population-driven demand. Even so, he expects a gradual lift in sales as borrowing costs fall. Stock levels remain high, so prices are likely to stay flat even if turnover improves.
Rate cuts give the market a nudge
The Reserve Bank’s 25-basis-point cut to the Official Cash Rate in August has already pushed mortgage rates lower, especially on floating and short fixed terms. Tuffley said the central bank’s signals last month helped bring term rates down slightly, though he cautioned that long-term rates still depend on follow-through.
“One of the challenges when looking at mortgage rates is that the financial market’s pricing of future Cash Rate cuts has oscillated somewhere at 2.75% - 3% for some time,” Tuffley said.
“That’s meant that you’ve generally had an environment where markets have priced in some probability of the Cash Rate falling below 3% anyway.
“We really need the Reserve Bank to follow through in order to hold those longer-term mortgage rates down, but there will clearly be more scope for movement in floating and six-month rates.”
He expects the biggest benefits for borrowers to come from these shorter-term products, which could prompt more first-home buyers and refinancers to act.
National picture remains mixed
Nationally, retail trade volumes rose 0.5% over the quarter and house sales gained 3.5%, but selling times remain longer than before the pandemic. Inflation edged up to 2.7% and unemployment reached 5.2%. Net migration has slowed to its lowest inflows since late 2022.
Southland climbed to second place on the strength of commodity prices and a jump in house sales, while Otago held third. Wellington dropped to the bottom, with house prices down 3.3% and consumer confidence weak.
Tuffley said the economy is still soft, yet falling interest rates and the resilience of primary-sector regions set the stage for a modest housing market pickup in the second half of the year. For now, affordability gains from lower mortgage rates are the main source of momentum, especially in regions like Auckland where buyers have been waiting for a clearer signal to re-enter the market.
