1. RBNZ steps up to the plate on Wednesday
At 2pm on Wednesday we’ll get the latest official cash rate (OCR) decision from the Reserve Bank of New Zealand (RBNZ). After the hype generated by most of the recent previous decisions, this next one could basically be a non-event. After all, the RBNZ has indicated it is now firmly in “wait and see mode”, and recent data has probably been moving in line with what it wants to see – e.g. signs of actual inflation and inflation expectations dropping further, and also some hints that the labour market might just be slackening a little too (with migration helping to alleviate skills shortages).
In terms of mortgage rates, it does need to be acknowledged that individual banks’ pricing decisions can still cause changes (as can fluctuations in offshore wholesale interest rates), regardless of what happens to the OCR. Even so, a flat OCR this week, holding at 5.5%, would add to the case for thinking that mortgage rates are broadly at a peak – albeit many existing borrowers are yet to fully reprice from previous lower rates onto those current higher market levels. And the OCR isn’t likely to come down significantly anytime soon either, given our ongoing inflation problems.
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2. More data to watch
We’ll also get May net migration figures on Wednesday and June rent price data the day after. Migration has been very strong lately, and even if it does start to tail off a bit in the coming months, it will still result in extra property demand, probably showing up first in the rental sector. Indeed, rents have already shown the first signs of a re-acceleration, so no doubt many property investors will be keeping a close eye on these two (related) data releases.
3. Property values still not quite at the floor
Property values have not quite hit the bottom in many areas, with June figures showing month-on-month falls in Auckland City, Franklin, Porirua, and Lower Hutt. But in other areas, including Hamilton, Tauranga, Christchurch, and Dunedin, values remained flat or even rose slightly. The patchiness of these regional results is consistent with an overall market that’s getting closer to the floor, although we’re not quite there yet. After all, sales activity has only just started to edge higher again (the result of fewer new listings), and there’s always a natural lag between more activity and prices finally starting to respond.
CoreLogic chief economist Kelvin Davidson: “The OCR isn’t likely to come down significantly anytime soon, given our ongoing inflation problems.” Photo / Peter Meecham
4. Shorter loan lengths drop in popularity in May
Data from the RBNZ showed that 65% of owner-occupier lending was done on fixed rates of up to two years in May, with investors at 70% – a combined figure across both borrower types of 67%. That was a sharp decline from the figures of 74% in March and 75% in April, but may just reflect banks’ pricing. For example, a typical high-equity three-year fixed mortgage rate edged down from 6.3% in April to about 6.2% in May – potentially attractive to more borrowers when compared against the one-year fix which was broadly stable at about 6.7%.
5. Dwelling consents drop again
It was no surprise to see that new dwelling consents in May were 18% lower than the same month last year, with higher interest rates, falling house prices, and the rise in building costs affecting both developers and potential buyers (and/or other households looking to commission a building project). That was the eighth decline in a row and took the annual rolling total down to around 45,000, from the peak of more than 51,000 a year ago. The downturn is set to continue for a while yet, but at least builders will remain pretty busy with the pipeline of consents already approved.
- Kelvin Davidson is chief economist at property insights firm CoreLogic
