Hopes Rise for a Rate Cut Amid Rare Window of Opportunity

New data from property media company OneRoof offers a stark perspective on New Zealand’s current housing market as the Reserve Bank (RBNZ) faces mounting pressure to lower interest rates.

Over the past month, the RBNZ has held the Official Cash Rate (OCR) steady at 5.5%—considerably higher than Australia’s 4.56% and Canada’s 4.5%.

Canada has already seen two rate cuts this year, with more expected, while the European Central Bank, Sweden, and Switzerland have also moved to lower rates. The United States is anticipated to follow suit in the coming weeks.

The RBNZ has maintained a hardline stance in its battle to reduce inflation following a post-Covid surge.

The bank aims to bring inflation down into its preferred 1-3% range. For the first quarter of this year, inflation was at 4%.

In its reasoning for maintaining the OCR at 5.5%, the RBNZ hinted at potential rate cuts in the near future, suggesting that the worst of the inflationary pressures might be behind us. The bank is also cautious about not pushing the country into a deep recession.

A Reuters survey found that 22 of 32 economists predict rates could drop to 5.25% or lower by the end of the year.

The latest property data from the OneRoof-Valocity House Value Index underscores the need for action.

The data revealed that average property values in more than 500 suburbs fell during the second quarter, with the majority of declines seen in Auckland—a key indicator of the overall market—where average prices dropped by 2.1% for Q2.

Wealthier regions across New Zealand have also been hit hard, including the South Island’s Queenstown-Lakes District, where the average price decreased by $122,000 to $2.717 million in Q2.

Nationally, the average property value fell by 0.9%, bringing it down to $969,000.

Not surprisingly, first-home buyers remain the most active vendor segment.

For sellers, it’s important to consider that while you may not achieve your anticipated price in today’s market, you’ll likely benefit from a substantial discount when you purchase your next property.

Three Quick Tips for Buyers:

1. Be Ready: Ensure you have a pre-approved mortgage so you understand your budget and can act quickly when you find the right property.

2. Think Long-Term: Focus on finding a property that aligns with your long-term goals and financial situation. Avoid making a purchase just because it seems like a bargain. If you’re buying your primary residence, the satisfaction of getting a good deal may quickly give way to buyer’s remorse.

3. Seek Out Motivated Sellers: In a tough market, many owners will hold out for their desired price. Look for motivated sellers who are willing to strike a deal quickly. Don’t hesitate to negotiate, as these sellers are usually more open to compromise in a slow market.