1. No change to the OCR on Wednesday?
All eyes on the Reserve Bank of New Zealand on Wednesday for the latest action on the Official Cash Rate. It’s "only" an interim Monetary Policy Review, not a full Statement, which means we only get a relatively short commentary with the decision rather than a detailed explanation and published forecasts.
Either way, the odds are that the RBNZ will keep the OCR at 3.25%, which would be the first pause since it began easing policy in August last year. The rationale this time is that it’s probably an opportunity to just sit back and assess the recent inconvenient lift in inflation (e.g. related to tariffs, global conflict, food prices, household energy, domestic council rates), even though the economy still looks pretty weak.
2. No jobs upturn in sight just yet
Start your property search
Indeed, just to reconfirm that our economy isn’t really moving much at the moment, last week’s filled jobs figures from Stats NZ were pretty much flat (technically up by 0.1% but there’s a tendency for subsequent downward revisions), and ANZ’s business confidence measure didn’t shift a whole lot either. To be fair, it’s at quite a high level – but it’s been there for a while now, yet any translation of sentiment into real activity remains elusive.
3. Property values largely going sideways
Last week’s Cotality Home Value Index showed a 0.2% rise in the national median property value in June, reversing two minor drops of 0.1% each in April and May. In other words, property values remain pretty flat, although it’s worth noting that Tauranga and Christchurch recorded more meaningful monthly increases of 0.6% apiece in June.
Cotality chief economist Kelvin Davidson: "Values remain pretty flat, although it’s worth noting that Tauranga and Christchurch recorded more meaningful monthly increases of 0.6% apiece in June." Photo / Peter Meecham
It remains a year of conflicting forces: lower mortgage rates support property sales and house prices, but other factors, including the abundance of listings and the subdued economy and labour market, working in the other direction. Anecdotally, the debt-to-income ratio limits have also started to bite in some cases.
I’m also growing increasingly cautious about the extent to which existing borrowers will spend their "cash windfall" as they reprice mortgages from around 6% to 5% or less. After all, some households will want to rebuild their savings. Others may well keep debt repayments the same and reduce the term of their loan.
Property values may only rise by 2-3% in 2025. Some owners and/or would-be sellers will be disappointed by that possible outcome. But buyers will likely welcome that result.
4. Dwelling consents are also just ticking along
More of the same was a common theme last week, with Stats NZ reporting that the number of new dwellings consented was pretty much unchanged from the same month in 2024, which meant that the 12-month rolling total also held at around the 33,500-34,000 range, where it’s been for around a year now. That’s a lot less than the peak of more than 51,000 consents, but on the positive side, it’s still a lot higher than previous cyclical troughs.
5. We could see another shift longer for borrowers
The May data on mortgage terms chosen by new borrowers is released on Tuesday. We’ve seen over the past few months that more people have started to lengthen their mortgages again, shifting from perhaps a six-month fixed rate to a 2-3 year rate instead. I’d anticipate that this (gradual) shift will remain in place in the latest figures.
- Kelvin Davidson is chief economist at property insights firm Cotality
