Reserve Bank of New Zealand Maintains Cash Rate, No Major Impact Expected on Housing Market Growth

Date Published: 11 April 2024

Key Facts

• Reserve Bank of New Zealand has decided to keep the official cash rate unchanged at 5.5 per cent.
• Most inflation measures are showing a downward trend, yet they remain ‘too high’, with a slow decrease in price pressures.
• Anticipation is towards the consumer price inflation data for the first quarter of 2024, to be released on April 17.
• Transactions activity and property values are likely to rise slowly, a trend observed since early 2024.
• Despite improved confidence levels in the housing market, constraints remain including stretched affordability and high mortgage rates.
• A surge in listings activity is providing buyers with more choices, mitigating some price pressures.
• Interest rates are expected to remain high for most of 2024, causing difficulties for new buyers and existing households with expiring fixed mortgage rate agreements.
• The next OCR decision is due on May 22, which might bring some guidance about when the first rate cut might occur.

Article Summary

According to CoreLogic NZ’s chief property economist, Kelvin Davidson, the Reserve Bank of New Zealand’s decision to maintain the official cash rate at 5.5% was expected. He noted that there wasn’t any compelling economic data since the bank’s last decision in late February to suggest any change to the rate. Most inflation measures are heading downwards, but they still remain higher than desired, and the decrease in pricing pressure is also slow.

The next focus will be on the consumer price inflation data for Q1 2024, slated for release on April 17. With respect to the housing market, the implications of the Wednesday’s decision seem to be minimal; both transaction activities and property values are projected to continue their slow-rise trend, a pattern observed since the start of the year.

Davidson added that despite a recent increase in confidence in the housing market, potential buyers still face significant hurdles such as high property prices and high mortgage rates. There’s been an uptick in listings activity which is offering buyers a wider selection and slightly easing price pressure.

However, interest rates are anticipated to remain high for most of 2024, posing challenges for new entrants to the market and existing households nearing the end of their current fixed mortgage rate agreements. More insight on potential rate cuts may come only with the next OCR decision slated for May 22.

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