The Reserve Bank (RBNZ) has kept the official cash rate (OCR) on hold again at 1.75% and signalled that the next move could well be down in the short term rather than up in the long term. Either way, today’s decision means that it’s still ‘business as usual’ for the property market, i.e. a steady outlook for 2019.

CoreLogic Senior Property Economist Kelvin Davidson comments:

It would have been a major surprise if the OCR had been changed today, given that the RBNZ’s dual mandate of low inflation and high employment is well on track. However, the statement was really interesting, noting that “the more likely direction of our next OCR move is down”. That’s a significant change from the last statement, which noted that the move could be up or down.

The timing of that potential OCR cut is still up for grabs, but however things move from here, little has changed in terms of the property market outlook. With the OCR set to stay low, mortgage rates will tend to follow suit – especially taking into account the strong current competition amongst banks. In turn, low mortgage rates will underpin market activity levels and property prices too.

That said, mortgage rates may not be completely flat. Most notably, the prospect that the RBNZ will force banks to hold more capital on their balance sheets in future would tend to put upwards pressure on domestic mortgage rates and/or reduce the amount of money that can therefore be lent. Some estimates are that this capital requirement could push up mortgage rates by one percentage point.

However, that won’t come into force for a while yet, so the property market outlook for 2019 remains benign. Values are likely to continue their increase around the regions, with Auckland and Christchurch lagging behind.