New Zealand’s economic prospects are good for continued steady growth, falling unemployment and low inflation according to the Reserve Bank.
The Reserve Bank identifies surplus capacity across the global economy despite areas of improved economic indicators with political uncertainty also remaining heightened increasing market volatility. The Bank also believes the exchange rate is higher than is sustainable for balanced growth
It is unlikely that the OCR (currently 1.75%) will be lowered further as a result of the Reserve Bank’s inflation outlook with loan restrictions continuing to be applied. Fixed interest rates have fallen in recent months to be at historically low levels however, the trading banks have been reluctant to pass on the most recent cuts due to tightening by the global regulatory authorities and the limited funds available from local depositors due to New Zealanders slipping back into a negative savings rate.
Net migration is at its highest level for over 10 years and this is adding to housing and household demand with business confidence remaining high. High net migration is supporting growth in labour supply and limiting wage pressure.
The residential property market in and around the Bay of Plenty area has continued to show improved buyer interest with average sale values showing strong increases. Residential building consents have shown a marked increase following increased sale volumes of vacant sites. Speculation builders are very active in the market with numerous areas on the periphery of the city undergoing considerable development.
Real estate agents, in many cases, who had previously been reporting a lack of stock, have now noticed a marked increase in listings of late with reducing demand.
Main drivers of the housing market:
High levels of net migration creating strong demand.
Low interest rates with the expectation that they will remain at low levels for the short to medium term.
Introduction of new lending rules for other than family home buyers, has had an impact on the market with agencies reporting increasing stock levels and a reduced level of buyer interest.