1. Nothing much to note for housing in the Budget
Last week’s Budget contained a relatively standard set of economic projections (e.g. GDP growth set to slowly improve, inflation broadly under control) and there also wasn’t much to note from a property perspective either, as expected.
I guess the most relevant, indirect policy change was around KiwiSaver, with both employer and employee contributions set to rise to 4% minimum over the next few years, but the Government contribution being scaled back. This might mean budding first-home buyers will have access to bigger deposits when it comes time for them to tap their funds (if they want/need to), but perhaps not dramatically so.
On the whole, then, the Budget will probably come and go quickly from a housing perspective. But from a wider perspective, tight Budgets seemingly lie ahead.
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2. ‘Business as usual’ for the market
Our recent monthly wrap-up of everything property-related confirmed that the market is essentially in a holding pattern at present. Sales are rising, but slowly, as are property values. Buyers can generally get finance and have plenty of choice amongst the stock of listings on the market; but vendors aren’t capitulating either. First-home buyers remain active, and investors are seeing opportunities.
In other words, to the extent that you could ever call our housing market ‘balanced’, it’s probably now – and these calm conditions could well continue throughout 2025, as the effects of lower mortgage rates are counter-balanced by the subdued economy and lurking credit restraints such as debt-to-income ratio limits.
Cotality chief economist Kelvin Davidson: "First-home buyers remain active, and investors are seeing opportunities." Photo / Peter Meecham
3. ‘Green shoots’?
Speaking of the economy, it’s certainly not racing away, but perhaps not going backwards anymore either. On one hand, it was disappointing last week to see the BNZ-BusinessNZ Performance of Services Index for April signal another fall in activity in this all-important sector. But April’s NZ Activity Index from Stats NZ, by contrast, continued to improve (up by 1.6% from a year ago). As has been the case for a while now, the economy continues to show mixed results.
4. Another cash rate cut looms
As such, and also given that inflation is just about still holding within the 1-3% target range, it seems highly likely that the Reserve Bank will deliver another 0.25 percentage point cut to the Official Cash Rate on Wednesday. But I’d say most focus will be on the tone of their commentary (e.g. around the medium-term effects of tariffs and global uncertainty), as well as their published forecasts for things like GDP, inflation, employment, house prices, and of course the OCR itself. Don’t be surprised if they hold back from committing too strongly to any one particular course of action ahead.
5. Still a lot of people switching banks?
I’ll also be watching the Reserve Bank’s data release on mortgage lending this week, especially the splits by debt-to-income ratio and by loan type (e.g. house purchase, bank switch). In recent months, borrowers have been very willing to swap lenders, due to incentives such as cash-backs, but also the short-term nature of their existing loans, meaning they’re not facing any break fees to get out of longer-term mortgages.
- Kelvin Davidson is chief economist at property insights firm Cotality
