1. It's OCR time
Clearly, the main item on the economic news calendar this week is the Reserve Bank’s official cash rate decision (the last for the year) at 2pm on Wednesday – likely to be a 0.25% cut.
But this will be a full Monetary Policy Statement (as opposed to the interim Review) and so the focus will quickly shift to the accompanying commentary and detailed forecasts for key variables, including GDP, employment, house prices, inflation and the OCR itself.
The likelihood right now seems to be that Wednesday’s cut could be the last in this cycle, given that the economy might finally be turning around (albeit slowly), but it will be interesting to see what the Reserve Bank is thinking on this front. It wouldn’t be a surprise to see the OCR track reaching a trough of around say 2.1% (i.e. between 2% and 2.25%), which implies some chance of a further cut, but by no means a guarantee.
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Regarding mortgage rates, further meaningful drops in fixed terms over the coming week or so don’t seem particularly likely (although always possible), given the banks have already been cutting lately – not to mention some of them offering even more significant cash-backs.
2. Sales activity is still rising
Measured across real estate agents and private deals, we recorded around 8500 property sales in October, 6% higher than the same month in 2024 and the 28th rise in the past 30 months. In other words, the sales trend remains upward and the total for the 2025 calendar year could be around 91,000, the highest since 2021 and a touch above the decade average.
This has started to bring down the stock of listings on the market a touch, and it could help to tip the balance towards (modestly) rising property values next year.
Cotality chief economist Kelvin Davidson: "Further meaningful drops in fixed terms over the coming week or so don’t seem particularly likely." Photo / Peter Meecham
3. Inflation still a concern
The selected price indexes data for October, covering about 45% of the benchmark quarterly CPI, highlighted areas of concern, including food and household energy, but also areas of improvement - airfares and housing rents have eased.
On the whole, then, this was an encouraging release and as a result some of the bank economists downgraded their Q4 CPI projections, likely to be a drop from Q3’s actual result of 3.0%.
4. A bit more low-deposit finance already flowing?
On Tuesday, the Reserve Bank will publish October’s mortgage lending stats. The amount of interest-only activity and bank-switching will be of interest, as will the debt-to-income ratio figures. The one item to keep an eye on is the loan-to-value ratio data, given the Reserve Bank's announcement last month that it will be easing the rules from next Monday. It might be too early to see much impact yet, but some banks may well have shifted early.
5. Capital gains tax hard to find
I'm finishing on a curiosity this week. Cotality's Home Value Index shows that the nationwide median property value for this month is barely 1% higher than it was two years ago and only 10% above where it was five years ago. In that environment, there may not have been a lot of capital gain tax for a government to collect, especially if investors had pulled back from selling anyway.
- Kelvin Davidson is chief economist at property insights firm Cotality
