This won't be much of a surprise...

There’s more cuts in the air. Since May ‘24 the Reserve Bank has delivered consistent cuts, like a $10 barbers - who are now $14 adjusted for inflation! 

The (OCR) which stands for Overlord of Cash Restrictions (not, really, but it should) is up for renewal again this week so it’s time to buckle up for the welcome down leg of the ride. 

On November 27, 2024, the Reserve Bank decided to slice the OCR by a hefty 50 basis points, bringing it down to 4.25%. 

This marks the third cut in just four months, and some banks have jumped the starters gun. 

Westpac is out of the blocks and racing hitting us with a sexy looking 4.99% rate. Winning the psychological war for lending by dangling that all important NUMBER 4 in a rate. 

As we can see from the RBNZ chart below, we finally tipped the bell curve from flat to declining rates. 

https://www.rbnz.govt.nz/statistics/series/exchange-and-interest-rates/new-residential-mortgage-standard-interest-rates

And it’s about time. Having a family and a mortgage these days is financially soul destroying! We’d all love the ability to re-fix to a better rate, save some surplus cash to invest or generally just not top up the bank's record profits would be wonderful!

The National Property Scene:

Economists are predicting a 6% rise in house prices next year, thanks to these lower interest rates. reuters.com

But let's not forget, we've been on a property price seesaw for a while now. After a 19% drop since the 2021 peak, a 6% uptick feels like finding a $5 note after losing your wallet. 

But, these cuts are welcome, not just for us poor property developers (sic, I know you all think we have no souls…but we do) but for the nation as a whole. 

The economy needs a jump start to shock it out of its slumber. 

National, for all of their promise, have been sluggish and cost cutting as an identity has further solidified their lack of forward thinking action. Feels like the accountants and HR have taken over and stand proud behind their bean counting, cost cutting measures.

Taking away grants from First Home Buyers and pulling the plug on many forms of social housing is paving the way for the next government to swing for the fences of a popularity vote and open the flood gates once again. 

When will we have more than 3 years vision and genuine collective objectives as a country to attain housing stability? 

Anyway, rant over!

We’ll all be watching with a lack of anticipation - like watching a rugby game we all know the result to. But still, we’ll cheer for any small win. 

Looking Ahead:

The Reserve Bank's crystal ball suggests economic growth will rebound in 2025, with house prices expected to lift by 8% over the coming year. rnz.co.nz

A few months back when the last announcement was made, I made a cheesy comparison to interest rates being the like the weather - and despite the cheese…that comparison still rings true. 

You can check it out here..

In the meantime, keep your seatbelts fastened and your expectations tempered. The property cycle is in full rinse and spin mode. 

And while lower interest rates might offer some relief, they won't solve underlying issues like productivity slumps and housing shortages.

But, as the old saying goes ‘time in the market is better than timing the market’. 

Anthony Anderson