1. Adrian Orr resigns
Adrian Orr’s resignation on Wednesday was certainly a surprise. I’m not wading into the debate playing out online on his performance as Governor of the Reserve Bank of New Zealand. The bottom line is inflation is back within its target range and the economy is showing signs of life. Anyone would take that as a win.
What’s more interesting is the “what happens next” stuff. Will the new governor do anything differently to what Orr (and the committee) might have done anyway? Hard to predict, although I doubt the new team at the top will deviate too much from the plan to cut the Official Cash Rate (OCR) further in the next two to three months.
One thing to keep an eye on are the LVR and DTI rules. Will the new governor change them? The settings for both have an impact on buying activity. Watch this space.
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2. Are inflation dangers still lurking?
Back in 2022, annual inflation hit a high of 7.3%. A run of interest rate hikes has seen inflation fall to 2.2% in the last quarter of 2024. We won’t get the hard numbers for the first quarter of 2025 until April 17, but Stats NZ will on Friday release the monthly selected price indexes for February (covering 45% of the benchmark quarterly CPI). The figures will probably show that inflation pressures generally remain under control. But with the Reserve Bank wary of a risk that short-term price gauges tick up a bit (due to the lower exchange rate and higher imported prices), the monthly data is still one to watch closely.
3. The calm before the longer-fixing storm?
My data-watching highlight will, however, come later today, with the RBNZ’s mortgage lending figures for January to show what loan terms new borrowers are choosing and what existing homeowners are doing with their mortgages (top-up or switching banks). This month, it’ll probably be “more of the same”, with a focus on floating or short-term fixed rates in the 6-12 month horizon. The next data in early April could show the start of a much-discussed switch from borrowers (both new and existing) back towards longer terms again.
CoreLogic chief economist Kelvin Davidson: "With interest rates having fallen significantly, there seems every chance that property values will now rise again." Photo / Peter Meecham
4. Migration trend is flattening out?
Stats NZ will release January’s migration stats on Thursday, which for a long time have been trending lower in net terms, as arrivals have fallen and departures have stayed high – this has taken the heat out of property rents. But there have been hints in the most recent migration data that the trend might be flattening out at around normal levels. One to keep an eye on.
5. The house price downturn is (probably) over
Finally, CoreLogic’s Home Value Index showed a 0.3% monthly rise in median property values across the country in February, the first meaningful increase since January last year. Christchurch and Dunedin were up 0.6%, Hamilton 0.5%, Auckland 0.3%, and even the previously-weak Wellington market avoided a fall, with a minor 0.1% rise.
To be fair, there are still restraints out there for house prices, including the abundance of available listings on the market and also the lurking effects of DTI restrictions for mortgage lending. But with interest rates having fallen significantly, there seems every chance that property values will now rise again on a more consistent basis in 2025.
Two points to note, however. First, not everyone will get good vibes from that outlook – after all, prospective buyers would want values to fall further or stay flat at worst. And second, ‘consistent’ is not the same as rapid growth. Indeed, the balance of probability suggests this next rising phase for property values could be much more subdued than in the past, especially if the Government is successful with its plethora of new land/housing supply policies.
- Kelvin Davidson is chief economist at property insights firm CoreLogic
