A new report from the Reserve Bank of New Zealand (RBNZ) reveals what many homebuyers already know – some parts of the Kiwi economy are more sensitive to a rise in the Official Cash Rate (OCR) than others.
RBNZ – Te Pūtea Matua – research found sectors that make or trade goods, as well as housing and real estate-related sectors, are the most sensitive.
“When the OCR increases, these sectors tend to cool more quickly. On the other hand, sectors like primary production, including dairy and meat, are less sensitive,” its report said.
Monetary policy also affects prices across a wide range of domestic goods and services, which do not face significant foreign competition as internationally traded goods.
The report said that for so-called non-tradables inflation, subgroups like housing construction costs, were more sensitive to monetary policy than energy or insurance.
The report comes as New Zealand’s property market continues a slow and somewhat two-paced recovery with the South Island outstripping the North Island in terms of value growth.
The market has been boosted by the RBNZ cutting interest rates from 5.5% last August to 3.5%. Consequently, we have had an estimated 35,000-40,000 homes come on to the market, giving buyers a rare spread of choice and negotiation leverage. This has hampered price growth in many markets, especially in Auckland and other North Island centres.
However, agents at the recent annual NZ Real Estate Conference were talking about how they are seeing more first homebuyers in the market, suggesting optimism is returning.
The recent housing June housing report by website OneRoof and data company Valocity included predictions of how long it might take New Zealand’s core real estate markets to return to their former strength.
The rebound needs to be substantial.
The market hit a price average peak of $1.098 million back in February, 2022. The current average is almost 12% below that figure at $969,000.
If NZ property can pull off an annual price growth figure of 5.6%, OneRoof and Valocity believe the market can return to its previous highs in about 12 months.
The report predicted when each major market was likely to fully recover.
Auckland: December, 2028.
Christchurch: July, 2025.
Dunedin: July, 2027.
Hamilton: November, 2027.
Tauranga: June, 2028.
Wellington City: July, 2031.