The housing market may remain subdued for the rest of the year, in spite of the latest interest rate cut by the Reserve Bank (RBNZ) and the possibility of more to come, according to property data company Cotality.
Cotality Chief Property Economist Kelvin Davidson noted that that the RBNZ's forecasts that accompanied the latest Monetary Policy Statement suggested that GDP may not have bottomed out yet, with a possible -0.2% drop in the second quarter of this year, and the unemployment rate could still rise a little further.
He also noted that inflation might still rise a bit higher due to the tradeable/imported content, but spare capacity in the economy should mean that wouldn't last.
"It seems fair to conclude from these projections that another one or even two OCR cuts lie ahead," David son said in a note on the latest RBNZ moves.
Normally, a cut to the OCR would flow through to lower mortgage rates, which in turn would be expected to stimulate the housing market and lift property prices.
But Davidson warns that any such flow through effects could be limited this time.
"The housing market effects from today's decision are likely to be small," he said.
"If anything, the possibility of more falls in mortgage rates than previously thought could lift activity and house prices a bit, but those rate changes may be fairly minor," he said.
"In the meantime, as the RBNZ has indicated, the economic and labour market outlook is still disappointing - which will tend to weigh on housing, as it's already doing," he said.
"Those concerns about job security might mean that many existing borrowers who are rolling off higher fixes from the past and down onto the new prevailing mortgage rates, might choose to save their extra cash or reduce the term of their loan by keeping repayments the same, rather than spend it in the economy or property market," he said.
"All in all, the rest of 2025 for NZ's housing market may be just as subdued as the first 7-8 months of the year," Davidson concluded.
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