RBNZ surprises market; interest rates fall to 2.25%

After reducing the official cash rate (OCR) four times during 2015, the RBNZ decided in March, to reduce the interest rates by a further 25 basis points. This decision takes the OCR to 2.25%, its lowest level since inception in March 1999.

RBNZ rate cut graph
  • 24 March, 2016
  • RESIDENTIAL
  • RBNZ, Rate Cuts, OCR

Key Indicators

  • The national median property price was $448,000 in January 2016, up 5.2% from 2015.
  • 5,048 dwellings sold in January 2016, up 4.3% on January 2015.
  • 20,065 dwellings sold by auction in the 12 months to January 2016, an increase of 45% on a year earlier.
  • The unemployment rate fell to 5.3% in December 2015 and employment growth rose 0.9% over the quarter.
  • Tourism remains strong with 343,400 visitor arrivals in January 2016, 41,000 higher than 2015.
  • The NZ Dollar has fluctuated between US$0.65 and Us$0.68 over the past month.

Effect on property markets

The decision from the RBNZ to push interest rates lower should see property markets receive a solid level of buyer enquiry and demand.  This is expected to help support and build on the recent market strength; especially regional centres with affordability issues and regulatory changes continuing to influence the Auckland market.
 

Looking forward

The RBNZ is now expected to wait and study the effect that the December 2015 and the March rate cut has on the national economy, before making any further changes to the OCR. If extremely low levels of inflation persist and economic growth remains sluggish the RBNZ still has room to cut rates further in 2016. Any such move will provide a further boost to property markets across the country, especially for first home buyers and owner occupiers, outside of Auckland, who have not been targeted by recent regulation changes.

The next RBNZ OCR meeting will be held on 28th April 2016.

 

 

 

LJ Hooker NZ

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