Rates fall, but housing outlook unchanged
The Reserve Bank (RBNZ) has reduced the OCR by 0.25%, bringing it to 5.25%.
“We had been in the ‘hold’ camp... but they deemed the economy weak enough to cut now,” said Kelvin Davidson (pictured above), CoreLogic chief property economist.
RBNZ forecasts weaker economic outlook
RBNZ’s forecasts now predict a prolonged recession, with employment set to fall and the unemployment rate expected to peak at 5.5% next year.
“RBNZ expects the recession to last a bit longer yet,” Davidson said.
House price growth is expected to remain subdued for another year.
See LinkedIn post here.
Limited immediate impact on housing market
Davidson suggests that the OCR cut may not dramatically impact the housing market.
“In reality, not a lot has probably changed... most people had already been anticipating an easing in monetary policy,” he said.
Banks have already started lowering mortgage rates, which will be a relief for households.
Job security concerns may curb property sales
While lower mortgage rates could benefit buyers, job insecurity may continue to limit sales and prices.
“The softer labour market is likely to be a restraining influence on house sales,” Davidson said, adding that debt-to-income ratio caps will also play a role.
Future easing dependent on inflation trends
RBNZ cautioned that future rate cuts depend on inflation behaving as expected, particularly domestic price pressures.
“It all still hinges on inflation ‘playing nicely,’” Davidson said, noting that inflation will remain a key factor to watch.
Read the CoreLogic media release.
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