July's rate cut on the line as Auckland absorbs drop in CVs

1. Everything you need to know about CVs

The biggest property market news last week was Auckland Council’s release of its new property valuations, which certainly grabbed the attention of homeowners in New Zealand's biggest city. Some key points from my perspective:

- Rating valuations are not an estimate of current market value (indeed, the latest CVs are already old, having been assessed in May 2024).

- Even though CVs dropped an average of 9%, most households will be paying more in rates, with those whose properties dropped below the average likely to be wearing a smaller increase.

- Potential sellers in Auckland are unlikely to get a lower or higher price now than they would have a week or two ago, regardless of their new CV.

Ultimately, the bigger concern for households should not be the change in CVs, but what their new rates bill will be. And if people disagree with their CV, they can always take the appeals process.

2. The market is always moving on

The latest Cotality suburb value data shows how much the housing market has changed since May last year. An upturn in values is slowly spreading across the country, with "slowly" the key word here. It’s certainly not booming out there, with the soft labour market a key restraint on property values at present.

Cotality chief economist Kelvin Davidson: "Potential sellers in Auckland are unlikely to get a lower or higher price now than they would have a week or two ago." Photo / Peter Meecham

3. Net migration continues to drift downwards

With departures still high (albeit not rising anymore) and new arrivals to NZ still sliding lower, the overall net migration balance continues to ease downwards – hitting an annual total of around 21,300 in April, the lowest for over two years, and now also a decent amount lower than the long-term average of about 31,900. Recent evidence suggests credit flows and interest rates matter more to house sales and prices, but the slowdown in migration is likely to be a contributing to the housing market's subdued performance, especially for rents.

4. Keeping a close eye on inflation measures

This week, Stats NZ will publish the May selected price indexes data, which is a monthly inflation indicator relating to about 45% of the benchmark quarterly CPI – tending towards so-called tradable/imported elements such as food and fuel. If anything, many inflation measures lately have been a little on the concerning side (i.e. rising), so this release will be closely watched too. Another tick up would increase the chances of a pause in the official cash rate in July.

5. And Q1 GDP is finally out this week too

The GDP growth figures for the first three months of the year are also out. This will likely be the main economic news for the week, even though it’s always old, given we’re nearly already at the end of Q2. Most expectations are that GDP will be up by around 0.7%, a good result, and perhaps a bit stronger than the Reserve Bank has been predicting, which would add weight to arguments against another cut in the official cash rate.

- Kelvin Davidson is chief economist at property insights firm Cotality