Westpac Institutional Bank Team
Westpac Institutional Bank
A hawkish speech from the RBNZ, strong housing market data, and slightly stronger than expected inflation data have prompted us to alter our OCR forecast. We now anticipate OCR cuts in December, March and June (previously December, January and March). We remain steadfast in our view that the terminal OCR will be 2.0%, compared to the current market expectation of 2.5%.
Last week’s batch of data revealed that the housing market had another very strong month in September – although the boom’s centre of gravity is shifting. In Auckland, house prices continued rising at a rapid clip, but the straws of a slowdown are in the wind. Turnover in Auckland fell in September, and numerous media sources are reporting lower auction clearance rates.
Meanwhile, Hamilton is experiencing a bona fide housing market upturn, featuring rapidly accelerating turnover and a 9% price gain over three months. The Tauranga market is also heating up, and there have been modest signs of life in a few other locations such as Dunedin and Nelson.
Some of the shift in regional focus is due to Aucklanders buying houses in cheaper centres nearby. But Reserve Bank and Government policy is also playing a role. For most regions of the country, lower interest rates and the upcoming loosening of mortgage lending restrictions is a stimulatory cocktail for house prices. Meanwhile, mortgage lending restrictions are about to be tightened for Auckland. And new tax rules targeting property “flippers” are more of a negative for Auckland than other markets, due to the preponderance of speculators in Auckland.
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