New Zealand’s ‘Goldilocks’ Housing Market: OCR Hold Expected, Construction Data, and Employment Trends Awaited

Date Published: 8 April 2024

Key Facts

• The Reserve Bank is likely to retain the Official Cash Rate (OCR) at 5.5%, indicating that inflation is gradually reducing but remains elevated, resulting in the OCR possibly decreasing early next year.
• The CoreLogic House Price Index reports a 0.5% increase in average property values nationwide in March, indicating a well-balanced market.
• New dwelling consents were down 6% in February from the same period last year, reflecting weakening construction activity.
• The timeframe to build has increased to around 18 months from 12 months pre-Covid, although more completions have been recorded.
• Filled jobs across New Zealand increased 0.3% in February, although the pace of job placements is slower compared to last year.
• Reserve Bank data shows most new loans are being fixed for no more than two years, reflecting the belief among borrowers that peak interest rates have been reached.

Article Summary

It’s speculated that the Reserve Bank will maintain the Official Cash Rate (OCR) at 5.5%, signaling a slow decrease in inflation but with rates unlikely to drop until early next year. This suggests that the plateau for mortgage rates may continue for most of 2024, with the latest Consumer Price Index figures due for release on April 17th.

The national property market seems generally balanced, as per the CoreLogic House Price Index, with a 0.5% rise in average property values in March. This moderate rate of growth is expected to continue throughout 2024. However, an increase in prices in 2025 may be counteracted by potential caps on debt to income ratios for mortgages.

While construction data from February shows a ‘less weak’ result, a 6% decrease from the same period in 2023 is observed. The completion rates of new dwellings are also reported to increase, but with declining consents, future completion rates are expected to drop alongside. Additionally, the timeframe to complete constructions has observed a rise, likely due to the Covid-19 pandemic.

Data from Stats NZ shows a slight increase in job fill rates, albeit at a slower pace. Borrowing trends reflect a perception of peaked mortgage rates, with most new loans fixed for a maximum of two years.

Source Link: To read the full article, click here.