The Reserve Bank has included a scenario for house price inflation rising nationally to 14% by early 2014, which it said was likely to force interest rates around 1% higher than would otherwise be the case.
Officials agreed such a forecast for national price inflation implied Auckland inflation running much hotter, possibly over 20%, although the bank has not forecast for regional house price inflation.
The bank included the scenario in its June Monetary Policy forecast. Its central forecast is for national house price inflation rising to 11% in early 2014, before falling back below 5% by early 2016.
"This momentum is driven by limited increases in residential investment to date, pent-up demand for housing, and low mortgage interest rates," the bank said.
"Beyond 2014, annual house price inflation is assumed to ease, reflecting an increase in the housing stock, gradual removal of monetary stimulus and worsening housing affordability," it said.
Its central forecast does not include any use of its macro-prudential policy tools.
8 Comments
The Reserve Bank has included a scenario for house price inflation rising nationally to 14% by early 2014, which it said was likely to force interest rates around 1% higher than would otherwise be the case.
It would seem the US Tresury market is leading the charge in terms of market force reaction to underline this rate rise expectation, given exuberant house trading activities in it's own territorty.
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The RBNZ's refusal to raise the OCR at this juncture can only be seen as a deliberate tribute to discount the costs of banks' domestic fuding as foreign wholesale funding costs rise. Home team preference is always of secondary concern.
S.H. ...So you are saying the RBNZ is suppressing the OCR to give local banks access to cheaper local money as offshore money goes up in price.
If RBNZ are right everyone and his dog will pile into property, cost be damned.
Are New Zealanders putting enough cash in locally at these low rates? How does a falling NZD affect this scenario.
Cheers
That's exactly what I said.
The NZ based bank funding statistics can be viewed here.
The so called retail household sector is a growing but small proportion of the bank funding required to satisfy current lending or bank claims as it is officially named.
Oops...somebody let the cat out of the bag...pre election bubble everyone...
There will be no increase in the new housing stock beyond normal activity...only fools would enter that tax stuffed game..There will be no removal of cheaper for longer...to suggest a 1% ocr rise would help throttle the bubble is plain stupid...The bubble prices will in fact generate greater activity and the credit factories will pump out the drugs on demand.
Clear now to any idiot that saving up to buy property is a mugs game. Borrow the deposit from family and take the drugs from the bank...you stand to lose the family cash but to cream off about 35% tax free over the next 24 months....it's a no brainer.
A leetle ciggy packet (back of) calculation for readers' edification: start with the current AKL house price of $565K. (Oh, sugar, read the loused-up table as Start for the year, Increment at Rate of 14% for that year, Ending price for that year)
Note that the Unitary Plan clicks in in Year 4 (if lucky) or sometime thereafter (if BAU for the ineptocrats).
Note also that, as TLA's routinely fail to understand compounding, they won't be able to understand any of this.
Start 14% Cumulative Year $ 565,000 $ 79,100 $ 644,100 1 $ 644,100 $ 90,174 $ 734,274 2 $ 734,274 $ 102,798 $ 837,072 3 $ 837,072 $ 117,190 $ 954,262 4 $ 954,262 $ 133,597 $ 1,087,859
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