1. Place your bets!
Clearly, the biggest housing market event this week is the Reserve Bank’s Official Cash Rate decision on Wednesday. The odds of a cut are as good as certain, but the only question is how big. Economists are split on this, and there are lots of factors to weigh up. Will the bank’s Monetary Policy Committee look at the inflation risks that have emerged and cut the OCR by just 25 basis points, from 3% to 2.75%? Or will it react to the weaknesses in the economy and with a chunkier cut of 50 basis points?
I think it will be the latter to really give household/business confidence and economic activity some impetus. But, as a typical economist, I also wouldn’t be surprised if it’s former. Place your bets.
2. Property values still tracking sideways
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Cotality’s housing market figures showed a 0.1% increase in New Zealand property values in September. It’s a small rise, but one that’s ended a five-month run of falling values. At a major metro level, the picture is mixed. Property values dropped in Wellington and Auckland, but rose in Christchurch and Tauranga. The figures also show value increases in Gisborne, Invercargill, and New Plymouth, which may be the result of the farming upturn.
In general, the market remains pretty subdued, but as mortgage rates drop (more banks have recently been lowering their rates) and pass through to more existing borrowers, there’s scope for rising house prices in 2026. A turnaround for the unemployment rate next year would reinforce that outlook.
Cotality chief economist Kelvin Davidson: "There’s scope for rising house prices in 2026." Photo / Peter Meecham
3. Has the jobs market turned a corner?
On that note, Stats NZ reported last week that there was a 0.2% increase in filled jobs in August, representing a rise of around 6000 from May’s low point. Admittedly, these numbers have a tendency to be revised downwards, so caution is still warranted. However, upturns have to start somewhere, and this might be the beginning of better news on the labour market.
4. Positive news for the construction industry
Stats NZ also released data on the number of new dwellings consented, with August’s total of around 3100 up by 7% from the same month in 2024 (although there was a 3% drop in July). This pushed the annual running total up to almost 34,100, the highest since May last year.
To be fair, these aren’t big shifts yet. But a bit like the filled jobs data, the upturn has to start somewhere, and a gentle lift in consents would be consistent with some more encouraging anecdotal evidence from builders. If this sticks, it’s great for wider economic growth. Rising housing supply would also be a reason for caution about the medium-term pace of property value growth.
5. Floating popular again in August, but less than expected
After a drop from 26% of new lending in June to 22% in July, floating mortgages rose back to 27% of activity in August, presumably as people awaited the RBNZ’s OCR decision on the 20th before deciding whether to fix and for how long. The rise for floating wasn’t perhaps as big as I had been expecting, but it makes sense. As mortgage rates generally approach a floor and the future path for fixed rates becomes clearer (albeit nobody knows for sure), there’s less benefit in keeping the flexibility that floating rates provide, given they’re higher than fixed. At 40% of lending in August, the one-year fixed rate remains the most popular individual loan term, which may well continue in the next few months too, given the banks’ recent cuts to those rates.
- Kelvin Davidson is chief economist at property insights firm Cotality
