You know what’s more unpredictable than New Zealand weather? Interest rates. One minute, the Reserve Bank’s hiking them like they’re on a Stairmaster; the next minute, they’re cutting them like a budget airline slashing legroom. It’s a bit like playing pin the tail on the donkey, only the donkey’s been drinking, and you’re blindfolded. Welcome to the world of the Official Cash Rate (OCR)—a rollercoaster ride that keeps Kiwis, homeowners, and property investors hanging on for dear life. The Reserve Bank’s latest moves? Well, let’s just say they’ve got us all questioning whether we should celebrate with champagne or head straight to the nearest bar to nurse our wounds.
In the words of Henry Russell, ANZ’s top economist, “what the market currently thinks hasn’t necessarily changed for some time. The market has expected the Reserve Bank to take the OCR to around the 3% mark over the coming months.” If you’re thinking this means your mortgage rate will continue to plummet, think again. The market has already priced in the cuts, and the dramatic falls we all dream of? They’re likely a thing of the past.
So, what does this mean for Kiwis? Well, let me put it this way: the price of your mortgage is like a rollercoaster. One minute, you’re up. Next minute, you’re down. And if you’re a first-time homebuyer or investor waiting for the perfect moment, let me just tell you—there’s no such thing as the “perfect moment.” Your chances of securing that dream home for a bargain are slimmer than a Kiwi’s chance of winning a rugby game against the All Blacks. But there is hope, though. If you keep an eye on the market and act fast, you could still be in with a shout.
TRUMP’S TRADE WAR AND THE SHAKY GROUND UNDER NEW ZEALAND’S PROPERTY MARKET
Now, what does good ol’ Trump have to do with your mortgage and housing prices? You might be thinking, “Come on, mate—he’s over in the US. What’s it got to do with my house in New Zealand?” Well, sit tight, because this one’s a doozy.
As Henry Russell points out, when it comes to tariffs, the market takes notice: “When Trump slaps tariffs on China, it doesn’t just impact the US. It ripples out like a stone dropped in a pond, and guess who’s caught in the waves? That’s right—New Zealand.” The fact is, Trump’s global trade war doesn’t just affect China. It’s got fingers pointing in every direction, from the US to Europe to Asia—and yes, even New Zealand is caught in the crossfire.
“China has been hit by a succession of tariffs,” Henry says, “so what does that mean for China’s growth? Does China find other markets to mitigate the impact?” The answer is, of course, yes. When China is hit, they’ll retaliate—and guess what? New Zealand might just benefit. But here’s the problem: while the rest of the world plays the tariff game, New Zealand’s property market still sits nervously on the sidelines, waiting to see how the chaos unfolds.
Now, don’t get too excited. The global turmoil caused by Trump’s actions might actually help Kiwis in some ways—like boosting the price of exports such as wine, meat, and dairy. But don’t start planning your next holiday just yet. Lower export prices aren’t a magic bullet. If global economic uncertainty continues to loom, it’s going to affect your ability to sell or buy a home.
PROPERTY AFFORDABILITY—THE GOOD, THE BAD, AND THE UGLY
Let’s talk affordability—because this is where things get really interesting. If you’ve been waiting for the market to turn, you’re not the only one. “House prices are much more affordable than they have been over recent years,” says Henry. But don’t get too excited, because, in New Zealand, “affordable” is a relative term. Sure, New Zealand interest rates are lower than they were a year ago, but we’re not exactly living in a fairy tale world where houses come with a free unicorn and a tax break.
Back in 2019, New Zealand’s house price-to-income ratio was around 6.5. But after the COVID pandemic and a whole bunch of rate cuts, that ratio shot up to a ludicrous 9. But now, as Henry says, “the house price to income ratio has since dropped back to 6.5,” which is an improvement, sure—but it’s not exactly the Holy Grail of affordability.
To make things worse, the issue of housing supply rears its ugly head. We need more homes built. And fast. Because as Henry says, “We’ve seen some positive steps in the last decade… but we’re just not building fast enough.” And if you think we’re going to see a massive wave of new homes hitting the market, think again. While we’ve seen some stabilization in the construction sector, it’s not enough. We need more houses. Period.
“Until we build more homes, we’re always going to be looking at a market that’s pushing the limits of affordability,” says Henry. It’s like trying to buy a car with a four-cylinder engine and expecting it to perform like a V8. Sure, it might work for a while, but eventually, the engine’s going to seize up.
NEW ZEALAND INTEREST RATES AND THE ECONOMIC RIPPLE EFFECT
The thing with New Zealand interest rates is this: they’re like a tightrope walker on a windy day. One gust from the global economy, and it could all come crashing down. As we’ve seen in recent years, the Reserve Bank’s OCR decisions have been a bit like a game of pin the tail on the donkey—except, the donkey is moving, and the blindfold is on tight.
You see, global markets don’t always follow the rules of the game. And Henry Russell’s point about the RBNZ’s influence over short-term rates is key: “The OCR has a huge influence over shorter-term interest rates in New Zealand, but it’s the long-term interest rates that reflect global trends.” So, while you may see some movement in your local mortgage rate, don’t expect the floor to fall out just yet.
But let’s talk about the global picture for a moment. Right now, global interest rates are a bit like that one guest at a wedding who drinks too much and starts making uninvited speeches. Trump’s trade wars are setting off fireworks, and the US is teetering on the edge of a fiscal cliff. What does that mean for the little ol’ Kiwi homeowner trying to make sense of it all? It means that the global landscape is shifting under your feet, and you need to keep an eye on the horizon.
As Henry put it, “The initial reaction from the market to Trump’s policies has seen long-term interest rates shoot up. But once the world saw that this wasn’t the end of the line, interest rates globally dropped once again, almost in a knee-jerk response to fears of a global slowdown.” So, while you’re trying to figure out whether to buy, sell, or just keep your money in a biscuit tin, the global interest rate game is being played by the big boys, and we’re just trying to make sense of their moves.
THE HOUSING MARKET AND THE STORM IN THE DISTANCE
Alright, let’s talk about what this means for the housing market. If you’ve been watching from the sidelines, you’re probably wondering if this is a dead-cat bounce or the beginning of something bigger. One thing’s for sure—interest rates play a big part in how the market behaves. But there’s more to the equation than that.
As Henry explained, the housing market has been pretty flat for a while, but it’s showing signs of life: “There’s been a bit of a recovery in investor sentiment since late 2023, and that’s due to policy changes like the reduction in the bright line test from 10 years to two years, the return of interest deductibility, and the Reserve Bank’s adjustments to LVR settings. But we still aren’t seeing the kind of speculative activity we saw during the mid-2010s.”
However, the flip side of this is that there’s still a lot of stock on the market, which means prices haven’t skyrocketed just yet. Henry’s cautious optimism shines through: “We’re penciling in a 6% lift in house prices for this year, but that’s probably more of a story for the second half of the year. The near-term is still uncertain as we work through the current stock on the market.”
And then there’s the construction sector. While there’s been some positive movement, it’s not as robust as we’d like to see. The pandemic threw a wrench in the works, and despite some positive signs from the Auckland Unitary Plan and ongoing government initiatives, Henry points out, “The construction sector needs more time to recover, and it’ll likely be late this year before we see any significant progress.”
Now, don’t get too comfortable. Just because we’re at the bottom of the cycle doesn’t mean things will bounce back tomorrow. As Henry states, “It’s a mixed bag of moves right now. Land prices remain strong in sought-after areas, but overall, we’re still seeing a lot of stock on the market that needs to be cleared.”
So, what’s the takeaway? The housing market is going to continue moving slowly, but we’re not looking at a crash. The future of the market depends on interest rates, global economic conditions, and how quickly the construction sector can rebound. It’s a waiting game, but as Henry said, “Things are looking more optimistic, but it’s going to take time. The next few years will be about stabilizing the market and allowing for more sustainable growth.”
CLARKSON-STYLE WRAP-UP
Right, so let’s wrap it up like the end of a Grand Prix race. The market is in a bit of a holding pattern right now, with New Zealand interest rates hanging on like a cliffhanger in a season finale. The global trade war and Trump’s antics may have everyone on edge, but the truth is—New Zealand is somewhat insulated. New Zealand interest rates are low, the housing market is slowly finding its feet, and the construction sector is, well, kind of getting its act together. It’s not a wild ride, but it’s steady, which in the world of property is about as good as it gets.
So, if you’re looking to buy, sell, or just sit tight, keep watching the markets closely. Don’t rush in, but don’t sit on your hands either. The market will rise and fall, but in the end, the key to winning is patience. After all, Rome wasn’t built in a day—and neither is your property portfolio.
Disclaimer: This article is intended to provide only a summary of the issues associated with the topics covered. It does not purport to be comprehensive nor to provide specific advice. No person should act in reliance on any statement contained within this article without first obtaining specific professional advice. If you require any further information or advice on any matter covered within this article, please contact an adviser from mortgagehq.
