EVERYTHING IN MODERATION
The Reserve Bank ’ s ( RBNZ ) Official Cash Rate ( OCR ) announcements aren ’ t the only thing tracking sideways this year , with forecasters predicting economic growth will be flat to middling for the next 12 months .
However , a look under the hood shows us a confluence of factors with a significant bearing on residential sales activity .
Global financial conditions have kept mortgage lending rates high during one of New Zealand ’ s most significant periods of international migration . Although forecasters anticipate a gradual decline in rates over the next eighteen months , the current situation has enabled us to accommodate this population influx , which , while increasing demand for housing , employment , goods and services , has had little substantial effect on domestic inflation readings .
The push-pull mechanism at work here reflects a gentle balancing act of current market conditions , where demand drivers offset the effects of dampening measures engineered by the RBNZ to reduce consumer demand and return inflation to the target range of two per cent .
Understanding these nuances often reveals opportunities for buyers and sellers , such as strong activity in the first-home buyer / affordable housing category and high-value luxury real estate , of which buyers are often less impacted by mortgage rate movements .
We ’ re also currently hearing a lot of noise about the effects of a rising unemployment rate , with Statistics New Zealand ’ s March quarter reading showing a rise of 0.3 per cent .
While the current rate of 4.3 per cent is neutral by historical standards , further increases here could have a large bearing on market confidence , eroding job security , and ultimately , households ’ appetite to increase debt levels with additional mortgage lending .
Fortunately , unemployment is coming off a historically low base , and Kiwis have made hay while the sun has shone , paying off debt and increasing their savings to deliver the lowest debt-to-disposable income ratio since 2015 .
Source : Statistics New Zealand , Macrobond , ANZ Research
Expectations for rate relief ( ANZ recently predicted the one-year fixed lending rate will fall around 120 basis points between now and the end of next year ) will provide a partial offset to a loosening labour market , and , generally speaking , Kiwis are well-positioned to manage expected financial change .
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