As we approach the Christmas period, there is a noticeably more positive sentiment emerging across the New Zealand economy.
While the improved mood is no doubt helped by warmer weather and a particularly sunny spring, there is also a growing sense that the economic malaise that has weighed on New Zealand over the past three years is beginning to lift.
Business confidence has rebounded strongly in recent months, with the ANZ November survey recording its highest reading in 11 years.
The Performance of Manufacturing Index (PMI) has also returned to expansionary territory for the first time since April 2025. It is also well documented that both the agricultural and tourism sectors are leading the country’s recovery, providing important momentum to the broader economy.
That said, the recently released PSI numbers (Performance of Services Index) were very disappointing, which reminds us that no recovery happens in a straight line.
GDP forecasts have strengthened materially, with the potential for the very weak Q2 results to be revised upwards.
While these developments are clearly encouraging, they should be viewed in the context of a prolonged economic downturn, from which the economy is now only just emerging.
Global Economy and the RBNZ
Globally, 2025 has been a year dominated by major headlines, often featuring the name “Trump.” From the “Liberation Day” announcements and tariff uncertainty that began in April, through to a series of high-profile diplomatic initiatives aimed at resolving several major geopolitical conflicts, global markets have had no shortage of volatility.
Closer to home, the Reserve Bank of New Zealand (RBNZ) has also featured prominently in the news, with commentary around staffing changes, workforce reductions, and governance matters. We have recently welcomed a new Governor, Anna Breman, who commenced earlier this month.
From a monetary policy perspective, the Official Cash Rate (OCR) has been reduced to 2.25%, down from a peak of 5.50% in August 2024. These cuts have undoubtedly helped to kick-start New Zealand’s economic recovery.
However, the commentary that followed the most recent 0.25% cut in November appeared to work against the decision itself. By suggesting the OCR was effectively at the bottom of the cycle, wholesale interest rates rose and some banks increased lending rates. In effect, the messaging reduced the benefit of the rate cut, highlighting how important clear and consistent communication is at this stage of the recovery.
Globally, it now appears that most countries are nearing the end of their interest rate cutting cycles.
New Zealand Property Market
The residential property market is generally expected to experience a year of modest recovery in 2026, with most major banks forecasting house price growth in the range of 3% to 6%.
Within the commercial property sector, 2025 has seen early signs of pricing stabilisation and recovery, particularly for A-grade assets. This trend is expected to continue, supported by lower interest rates, with demand focused on modern, well-located properties with strong tenant covenants and secure lease profiles.
Land sales activity has increased, signalling renewed interest in industrial development. More broadly, investor sentiment has improved as the relative attractiveness of commercial property returns, compared to low term deposit rates, becomes increasingly evident.
We expect this environment to continue strengtening as we move into 2026.
FMA Audit and ESG Initiatives
First Light Capital recently completed an AML audit conducted by the Financial Markets Authority, which was successfully concluded in November. We would like to thank those investors who have recently updated their AML documentation with us, either online or in person.
Anti-Money Laundering compliance remains a critical regulatory obligation, and we are pleased to have completed this process to the FMA’s satisfaction.
Across the wider portfolio, the team continues to progress a number of ESG initiatives. We are pleased to report that two of our industrial assets are now on a pathway to achieve base-level Green Star Performance ratings.
Together with the NABERSNZ ratings already held across all but one of our commercial properties, this represents an important step toward full ESG compliance across the portfolio.
These initiatives are increasingly critical in attracting and retaining high-quality tenants.
First Light Capital Update
First Light Capital recently completed a fund consolidation, successfully integrating three single-asset syndicates into the existing First Light Property Fund.
This has created a larger, diversified, multi-asset fund comprising six premium properties. Investment into this fund remains open, and investors are encouraged to contact the Manager for further information.
To view the Investment Summary click here.
Looking Ahead
With the New Zealand economy now on firmer footing, we are confident that 2026 will see further recovery across the property sector.
In the meantime, we would like to wish all our investors and stakeholders a relaxing and enjoyable Christmas and summer holiday period.
For more updates on our sustainability initiatives and asset management approach, sign up to our NZ Property Market Update.