May 2025 Outlook and AIP Visa Enhancements

In this month’s update, we examine key macroeconomic indicators, policy developments, and real estate trends shaping the New Zealand investment landscape. Specifically, we discuss:

• Macroeconomic Outlook: GDP, inflation, and interest rate trajectories

• Foreign Exchange Trends: Implications of NZD/USD recovery for offshore investors

• Export Sector Overview: Trade diversification and resilience

• Geopolitical Hedge: Why New Zealand remains a safe haven amid global uncertainty

• Real Estate Insights: Regional performance, foreign buyer activity, and pricing stability

• Investor Visa Reforms: Recent AIP visa changes and their impact on capital flows

• Fairhaven’s Strategy: Targeted asset classes and AIP-compliant investment structures

• Current Opportunities: Live real estate investment options across New Zealand
  

Executive Summary

As global markets navigate ongoing macroeconomic uncertainty, New Zealand continues to stand out as a stable, strategically positioned investment destination. The country’s economic fundamentals remain robust, supported by consistent GDP growth, declining inflation, and improving consumer sentiment. With the Reserve Bank of New Zealand lowering the Official Cash Rate (OCR) to 3.5% as of April 9, 2025, borrowing conditions have become increasingly favorable, stimulating renewed interest in the real estate sector.

Currency dynamics further reinforce the attractiveness of this market. The NZD/USD exchange rate has recently recovered to 0.59, following a multi-month period of weakness during which it dipped to as low as 0.56. This recent appreciation indicates that the entry window for foreign investors may be narrowing. We believe the market is approaching the bottom of the rate cycle, and that further currency normalization and capital appreciation could follow in the coming quarters. This makes current FX levels a compelling but time-sensitive opportunity for offshore capital to secure discounted New Zealand real estate assets.

In this context, Fairhaven Property Group has adopted a forward-looking strategy focused on real estate sectors with long-term structural demand drivers. We continue to concentrate on high-yield, resilient segments including student accommodation, aged care, and industrial/logistics assets, areas aligned with demographic trends and policy tailwinds. Our approach is centered on acquiring underperforming or undervalued assets, enhancing operational efficiencies, and strategically positioning portfolios to benefit from cyclical recovery.

Moreover, recent changes to New Zealand’s investor visa framework are expected to re-ignite interest among global high-net-worth individuals, particularly from the Asia-Pacific region. These policy developments, combined with FX advantages and easing monetary policy, enhance the investment case for New Zealand real estate, especially when measured against the volatility of other OECD markets.

In sum, the current macroeconomic backdrop offers a rare alignment of discounted entry, favorable policy momentum, and sectoral strength. However, as monetary conditions begin to stabilize and the currency strengthens, this unique confluence of factors is unlikely to persist. Investors who act decisively today are best positioned to capture the upside of New Zealand’s next growth cycle.

Macroeconomic Overview

New Zealand’s macroeconomic indicators reflect a cautiously optimistic environment for investors. While the economy has weathered a period of tightening financial conditions and subdued growth, the latest data suggests we are nearing a turning point, presenting a narrowing window of opportunity for strategic real estate investment.

GDP Growth and Inflation

The Reserve Bank of New Zealand (RBNZ) projects real GDP growth of 2.0% for 2025, up slightly from sub-1.5% levels in 2024. This modest but improving pace reflects a stabilizing economy as monetary policy shifts from restraint to accommodation. Key sectors including tourism, agriculture, and education, are showing early signs of recovery, with international demand picking up across services and exports.

Inflation has eased meaningfully, now sitting at 2.5% as of March 2025, comfortably within the RBNZ’s 1–3% target band. This marks a significant improvement from the 5–7% highs seen in 2022–2023. The moderation in consumer prices supports the RBNZ’s dovish shift and suggests that the worst of the cost-of-living pressure has passed, making operating environments more predictable for landlords and developers.

Official Cash Rate (OCR) Trajectory

In line with declining inflation and slowing growth, the RBNZ reduced the OCR to 3.5% in April 2025, down from a peak of 5.5% in late 2023. Markets are now pricing in at least one more cut in 2025, potentially bringing the rate closer to 3.0%. This easing stance bodes well for leveraged investors, as lower borrowing costs directly enhance project IRRs and equity returns.

This pivot represents the late stages of New Zealand’s interest rate cycle. Our view at Fairhaven is that we are approaching the bottom of the cycle, and as such, the window to capitalize on discounted valuations and soft credit conditions is rapidly narrowing. Once rates stabilize or begin to climb again in 2026, the market will likely reprice risk, and asset values will adjust accordingly, making now a particularly attractive moment to deploy capital.

Foreign Exchange Trends

The New Zealand dollar (NZD) remains materially undervalued against the U.S. dollar, trading at approximately 0.59 NZD/USD as of May 2025. For context, the NZD was trading as low as 0.57 in late 2024 and has ranged between 0.57–0.62 over the past six months.

This level represents a multi-year discount, with purchasing power for USD-based and SGD-based investors at a relative high. Historically, the NZD has traded closer to 0.65–0.70, and while near-term volatility remains, any normalization in global risk sentiment or improvement in New Zealand’s trade balance could lift the currency. As such, current FX conditions amplify the effective yield for offshore investors and present a unique window for cross-border acquisitions.

In short, we believe the FX-discount window is closing, both due to a potential bottoming out in NZD valuation and a likely floor in interest rates. Investors who enter now will benefit not only from cap rate compression as rates fall, but also from a potential currency tailwind if the NZD appreciates in 2026–2027.

Export Strength & Strategic Diversification

New Zealand’s export-driven economy remains a key pillar of its macroeconomic stability, supported by a well-diversified trade portfolio that shields the country from overexposure to any single market. As of early 2025, exports are holding steady, with demand in primary sectors such as dairy, meat, forestry, and horticulture maintaining strong performance despite a challenging global environment.

• China (≈28–30%) continues to be New Zealand’s largest trading partner, with demand rebounding modestly following easing credit conditions in China. Dairy and protein exports remain central to this relationship.

• Australia (≈15–16%) offers a consistent and geographically convenient export market, contributing to dependable cross-Tasman trade.

• United States (≈10%) remains a key but secondary partner, particularly for wine, tech, and niche manufacturing exports.

• Japan (≈7.5%) and South Korea (≈7%) maintain steady demand for premium food products and forestry goods, further reinforcing regional diversification.

• European Union (≈6%) continues to be an important outlet for value-added exports, particularly under the recent NZ-EU Free Trade Agreement set to progressively eliminate tariffs.

Strategic Hedge Against U.S. Volatility

New Zealand offers a compelling counterbalance to volatility in the U.S. and other major economies. Investors increasingly view the country as a geopolitical and economic hedge due to the following:

• Political and Regulatory Stability: New Zealand consistently ranks among the world’s most transparent and business-friendly environments, with strong legal protections and a predictable regulatory regime. This contrasts with increasing policy unpredictability in the U.S. and parts of Europe.

• Export Diversification: Unlike economies heavily reliant on the U.S. market, New Zealand’s broad export footprint across Asia-Pacific and Europe acts as a natural buffer against external shocks originating from a single country.

• Currency Advantage: The NZD/USD exchange rate has rebounded to 0.59 as of May 2025, after trading as low as 0.56 in late 2024. Investors entering during the trough have already seen currency appreciation. However, the window for discounted entry is narrowing, as both the currency and interest rate cycles approach inflection points.

Diversification Benefits for Global Investors

New Zealand real assets provide structural portfolio advantages through:

• Risk Reduction: By allocating to New Zealand, investors reduce exposure to concentrated geopolitical or market risks in the U.S. or EU. Historically, New Zealand has demonstrated strong resilience during global downturns (e.g., 2008, COVID-19), owing to its conservative fiscal management and export insulation.

• Stable Cash Flows: Export stability translates into consistent economic activity and investor confidence, essential for asset classes like real estate, which depend on predictable rental and yield performance.

• Countercyclical Value: As a small open economy with independent monetary policy and strong institutional credibility, New Zealand offers investors a counterbalance to the cyclicality of major economies.

Sustained Foreign Interest in Real Estate

The foreign investment thesis remains robust. During periods of NZD weakness, such as in late 2022 and again in Q4 2024, offshore demand surged. Recent figures show continued foreign buyer activity, particularly in urban markets such as Auckland (≈27–28% of auction sales) and Canterbury (≈24%), with Gisborne peaking above 35%.

This sustained demand is not only a function of favorable FX but also reflects confidence in New Zealand’s long-term demographic trends, regulatory transparency, and the scarcity of quality real estate stock. Foreign participation adds liquidity and reinforces the institutional credibility of the asset class.

Real Estate Market Insights

The New Zealand property market continues to show signs of recovery and strategic repositioning, underpinned by improved macroeconomic indicators and increased investor confidence. As of early 2025, the landscape offers compelling opportunities for long-term yield-focused investors, especially in high-performing regions and secondary urban centres where capital outlay remains favorable.

Stable Pricing Across Core Markets

According to the Real Estate Institute of New Zealand (REINZ), the national median house price held firm at NZD $795,000 as of March 2025, unchanged year-on-year, despite global headwinds and tightening credit conditions in other markets. This stability reflects the inherent resilience of the residential market, following a correction from its cyclical peak of NZD $925,000 in late 2021.

Key metro areas such as Auckland and Wellington have largely stabilised, but yield compression and high acquisition costs continue to make secondary markets more attractive from a value perspective.

Rising Sales Volumes & Regional Momentum

Sales volumes are trending upward nationally, with a +11.4% increase year-on-year as of March 2025, led by strong momentum in both established and emerging regional centres. The largest year-on-year gains in transaction volume were recorded in:

• Gisborne: +54.2%

• Hawke’s Bay: +32.7%

• Wellington: +29.5%

• Canterbury: +18.9%

• Otago (including Dunedin): +16.4%

These trends reinforce a growing buyer preference for Tier 2 and Tier 3 cities, where infrastructure improvements, population inflows, and affordability continue to drive both investor and owner-occupier demand.

Increased Investor Activity and Auction Sales

Investor sentiment is rebounding, particularly in the mid-market segments. Auction activity, a reliable indicator of investor demand, remains robust:

• Gisborne: 37.5% of all sales

• Auckland: 28.1%

• Canterbury: 23.8%

• Otago (Dunedin): 22.6%

These numbers reflect heightened investor appetite in both primary and secondary markets, with stronger competition emerging in traditionally undercapitalized regions such as Dunedin and Invercargill, where acquisition costs remain lower while rental yields outperform national averages.

Sustained Foreign Interest in Real Estate

The foreign investment thesis remains well-supported by recent FX movements and demographic tailwinds. Periods of NZD weakness, such as in late 2022 and Q4 2024, when the NZD/USD reached lows of ~0.56, saw a marked uptick in offshore activity. With the exchange rate now rebounding to ~0.59 (as of May 2025), interest from U.S. and Southeast Asian investors remains elevated, though the window for currency-based arbitrage is narrowing.

Offshore buyer activity is strongest in:

• Auckland (~27–28% of auction sales)

• Canterbury (~24%)

• Gisborne (>35%)

This sustained demand is driven not only by currency dynamics, but also by confidence in New Zealand’s regulatory transparency, long-term demographic stability, and scarcity of high-quality real estate stock. Foreign participation continues to add liquidity and institutional depth to the market.

Active Investor Plus Visa: A Strategic Gateway for Global Investors

Recent Reforms Driving Investor Interest

In April 2025, New Zealand enacted sweeping changes to its Active Investor Plus (AIP) visa, making it a standout option for global investors seeking residency through high-impact capital deployment. These enhancements streamline the visa process, broaden the scope of eligible investments, including direct and real estate-linked opportunities, and eliminate prior barriers such as English language requirements.

Key updates include:

• Flexible Investment Thresholds:

• Growth Investment Pathway: Minimum NZD $5 million over 3 years in high-growth investments like direct equity, managed funds, and private real estate projects.

• Balanced Investment Pathway: Minimum NZD $10 million over 5 years with broader asset eligibility, including real estate development, fixed income, and growth equities.

• Residency Flexibility:

• Only 21 days (Growth) or 105 days (Balanced) in New Zealand required across the investment period, suited for global investors seeking strategic residency rather than full relocation.

• Expanded Investment Options:

• Now includes commercial real estate development, industrial assets, social infrastructure (e.g. aged care), and greenfield or brownfield housing, a win for real estate-focused portfolios.

• Simplified Requirements:

• No English proficiency or business background needed.

• Investors have six months (extendable to 12 months) to deploy capital post-visa approval.

These reforms signal New Zealand’s intent to attract active, growth-oriented capital rather than passive investments like government bonds, aligning closely with Fairhaven’s investment philosophy.

Fairhaven Advisory : Your Strategic Partner for AIP-Aligned Investments

Fairhaven Advisory is uniquely positioned to support AIP applicants in deploying capital into qualified, high-performance real estate opportunities across New Zealand. Our firm specializes in resilient, yield-focused strategies that meet AIP requirements while maximizing long-term upside.

What We Offer AIP Investors:

• Turnkey AIP Investment Structuring:
  We guide investors through the visa application and ensure all capital deployment complies with Immigration NZ's approved asset classes and timelines.
  

• AIP-Compliant Investment Vehicles:
  Our structured investments span student accommodation, aged care, industrial logistics hubs, and build-to-rent housing,many of which qualify under the Balanced or Growth investment categories.
  

• FX & Timing Advantage:
  With the New Zealand dollar remaining relatively low vs. the U.S. dollar and OCR (Official Cash Rate) cuts now easing capital costs, the current cycle is ideal for entry.
  

• Localized Market Intelligence:
  Fairhaven provides in-depth market analysis, due diligence, and asset management, maximizing investor returns and de-risking foreign capital inflow.

Beyond compliance and placement, Fairhaven’s core strength lies in value creation through distressed or underperforming real estate. This aligns well with AIP’s directive to attract “active” capital that supports business and economic development.

Our strategies include:

• Leveraged Buyouts (LBOs):
  Acquisition and turnaround of underperforming real estate-backed businesses, such as aged care providers or student accommodation operators, to enhance operational margins and valuation.
  

• Roll-Up Strategies:
  Consolidating fragmented sectors, particularly in aged care and community healthcare, into unified platforms that benefit from operational efficiencies and scale.
  

• Distressed Asset Acquisition:
  Opportunistically acquiring undervalued assets affected by cyclical downturns, regulatory shifts, or capital constraints, and repositioning them for growth.
  

• Long-Term Buy-and-Hold Strategies
  For investors seeking lower risk and income stability, we offer access to stabilized assets in core and secondary markets. These include residential portfolios, commercial/industrial/logistics hubs, and healthcare real estate with secure leases. These properties are carefully selected for yield durability, capital preservation, and regulatory resilience, making them ideal for conservative capital seeking predictable returns.

Live real estate investment options across New Zealand

1. Auckland City (Boutique Hotel / Apartments)

Asking price - NZD 24,500,00
Land size - 3,634m²
Built Up Area - 3,725m²
Estimated Cap Rate - 7% - 8% 
Estimated NOI - NZD 1,715,000 - 1,960,000
Est. Occupancy - 85%-90%

2. Queenstown (Retail Centre)

Rated Valuation (RV) - NZD 59,500,000
Land size - 3,285 m²
Built Up Area - 4,800m²
Estimated Cap Rate - 6%
Estimated NOI - NZD 3,316,819
Est. Occupancy - 80%

3. Manukau City (Industrial Building)

Rated Valuation (RV) - NZD 37,000,000
Land size - 3.92ha
Built Up Area - 14,208 m²
Estimated Cap Rate - 6%-7%
Estimated NOI - NZD 2,220,000 – 2,590,000
Est. Occupancy   - 90%

4. Auckland City (Office Building)

Asking Price - NZD 40,000,000
Land size - 1,852m2
Built Up Area - 8,846m2
Estimated Cap Rate - 7.5%
Estimated NOI - NZD 3,264,740
Est. Occupancy   - 90%