The five things you need to know about the housing market this week.
1. Looking beyond Wednesday’s OCR decision
The Reserve Bank will be making a call on the Official Cash Rate on Wednesday. It’s almost certain to hold it at 2.25%, as it looks through the initial effects of the Iran war and higher oil prices on inflation. The general tone of April's Monetary Policy Review may be pretty similar to Governor Anna Breman’s speech at the end of last month.
Analysts will searching for any clues about what's around the corner. Is the Reserve Bank concerned about "second round" inflation, such as higher wage demands to counter increased cost of living? Or is it worried about the possibility of a new recession, which would tend to lower inflation?
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In the end, nobody has a crystal ball and this whole situation remains hugely uncertain. For the housing market, though, the headwinds do seem more likely than tailwinds, including the potential for higher mortgage rates, a weaker economy and a depressed jobs market.
2. Property value growth in February and March may well peter out
Cotality's latest housing market figures showed a modest rise in the nationwide property value of 0.2% in March, following a similar-sized bump in February. Property values in Auckland and Wellington remain sluggish, but rose to new peaks in Christchurch, Dunedin, and Invercargill.
Of course, the longer the Iran situation lingers, the more likely this turnaround in house prices is knocked on the head. Indeed, buyers and sellers were already in a fairly cautious mood at the start the year, and confidence is unlikely to strengthen in the face of sharp rises in the cost of living.
3. Employment prospects could fade again
On that note, it was also concerning to see the sharp (but not surprising) drop in ANZ’s business sentiment indicator in March, including firms’ hiring intentions. Granted, Stats NZ also reported a small lift in actual filled jobs in February, with the annual change at zero, the first time it had been out of the negatives since May 2024. But as businesses rein in their expansion plans, it’s far from out of the question that filled jobs flatten or even drop on March’s results.
Cotality chief economist Kelvin Davidson: "Confidence is unlikely to strengthen in the face of sharp rises in the cost of living." Photo / Peter Meecham
4. New dwelling consents are trending higher … for now
At least there was good news last week in the form of a higher number of new dwellings consented in February, rising by 23% from the same month last year, with the annual running total now up to around 37,500, the highest level since November 2023. This all looks very encouraging for actual workloads further down the track and also housing affordability. But yet again, we’ll just have to wait and see how things look in March’s data and beyond. After all, we’re already hearing anecdotes of large fuel surcharges being added in the construction industry.
5. Fix, fix, fix?
On Thursday this week, the Reserve Bank will publish February’s mortgage stats broken down by the terms chosen for new loans. Recently more borrowers have been taking longer term mortgages (especially two-year rates), and I’d expect this pattern to have continued in February as households try to get some protection against the risk that interest rates rise even further in the coming months.
- Kelvin Davidson is chief economist at property insights firm Cotality
