THE CYCLICAL NATURE OF THINGS
The latest OCR adjustment does, however, reflect a deeper challenge for New Zealand’ s economy over the last decade.
Analysts note that long before the pandemic, the RBNZ struggled to keep interest rates elevated for long. When inflation eased, rates fell. When they rose, growth faltered. The pattern has been clear that New Zealand’ s economic momentum remains closely tied to the cost of borrowing, and by extension, the housing market.
This can be attributed equally to policy and the structure of the financial system, as property remains the country’ s largest store of household wealth, and residential lending is a primary channel through which monetary policy flows into the real economy.
Analysts note that when mortgage lending rates fall, affordability improves, confidence lifts, and purchasing power expands – a sequence that has reliably underpinned economic recovery in past cycles.
“ When mortgage lending rates fall, affordability improves, confidence lifts, and purchasing power expands – a sequence that has reliably underpinned economic recovery in past cycles.”
Forecasts vary, but most major banks see the cash rate settling somewhere between 1.50 per cent and two per cent by next year – enough to make sub-four per cent mortgage rates a realistic prospect.
The implications for homeowners are straightforward: cheaper finance supports asset values and strengthens household balance sheets. The precise timing of future cuts may be debated, but the overall direction of monetary policy is clear – and the housing market is already responding.
KIWIS BECOME MORE FLEXIBLE
In the long term, evolving attitudes toward housing are reshaping demand.
A New Zealand Housing Survey by strategic consultancy The Urban Advisory found that while 79 per cent of respondents preferred living in a standalone home, 58.50 per cent are open to living in a townhouse or semidetached dwelling, and 67 per cent of those under 35 would consider low-rise apartments.
The traditional Kiwi dream of the quarter-acre section remains alive – look at interest in new lifestyle communities. However, Kiwis are becoming more flexible to mitigate cost pressures, and alternative ownership models are gaining ground. From co-housing and built-to-rent developments, we expect to see opportunities in these sectors in the years ahead.
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