1. More OCR cuts to come
The biggest economic news last week? The lowering of the Official Cash Rate to 3% and a clear signal from the Reserve Bank that another two cuts in 2025 are potentially on the cards. Both actions are a reaction to weak economic growth and a potential undershoot of the 1-3% inflation target. Granted, inflation is currently at the upper end of the target, and may push closer to 3% in the next few months, but the Reserve Bank expects it to drop as spare productive capacity weighs on prices.
The near-term impact of the OCR cuts on the housing market could be fairly muted because even if mortgage rates fall further, because weaknesses in the labour market are still acting as a restraint. That said, with the stock of listings now trending lower and the unemployment rate set to drop over the first few months of next year, there may be some modest increases in property values as we get into 2026. This is emphasised by about half of all existing mortgage-holders being set to reprice to new, typically lower interest rates by Christmas.
2. When will movers get busier again?
Start your property search
Find your dream home today.
In last week’s column, I touched on Cotality’s latest buyer figures, which highlighted strong activity by first-home buyers and multiple property owners with a mortgage. One other interesting aspect, though, is the relative absence of owner-occupiers in the market – movers just aren’t moving.
There are several possible explanations for this: homeowners are cautious, and getting a sale at a desired price is a challenge in the current flat market. Life does roll on in the meantime, though, and living needs do change over time. I suspect there is some pent-up demand from movers, but it hasn’t yet spilled into the market.
Cotality chief economist Kelvin Davidson: “There may be some modest increases in property values as we get into 2026.” Photo / Peter Meecham
3. Bank switching is still a trend to watch
The first set of data to monitor this week is the Reserve Bank’s mortgage lending figures for July, due on Tuesday. The important breakdowns include the split by interest-only and high/low LVR, with DTIs also worth watching at present, too, as the internal servicing test interest rates at the banks decline. But perhaps the most focus lately has been on bank switching or ‘refi’, with people chasing cashbacks at a new lender, and also simply more able to switch than before (without break fees) due to the short-term structure of a lot of loans. This could remain a key issue for a few months yet.
4. Desperately seeking positive job news
Next up, on Thursday, will be Stats NZ’s filled jobs data for July. We’ve had a run of weak jobs figures this year, and there is a good chance July’s figures will also be soft. Firms are still cautious about hiring and the Reserve Bank doesn’t expect any meaningful drop in the unemployment rate until early next year.
5. Economy still in a funk
On Friday Stats NZ will publish July’s NZ Activity Index. This timely measure of economic activity rebounded in June, but softer results in April-May still point to a negative result for official GDP in Q2. That’s consistent with other indicators, such as the Reserve Bank’s Kiwi-GDP measure, currently projecting a -0.2% fall. In other words, the economy is not showing clear signs of a revival just yet.
– Kelvin Davidson is chief economist at property insights firm Cotality