For too long, Kiwis have traded houses between each other almost as a form of national sport. Photo / Dean Purcell
THE FACTS
- The Reserve Bank kept the Official Cash Rate on hold at 2.25% this week.
- It expects house prices to gradually recover this year before growing at around the rate of household income growth over the medium term.
- REINZ data show the housing market remained weak in January.
The economy is slowly on the mend, but don’t expect house prices to bounce back sharply.
That was one of the messages in the Reserve Bank’s first Monetary Policy Statement of the year.
Usually when the Official Cash Rate (OCR) is cut, house prices rise, helping home owners to feel better about their finances and open their wallets.
That hasn’t happened this time around.
The OCR has been cut eight times since August 2024, falling from 5.5% to 2.25%.
On Wednesday, the Reserve Bank of New Zealand (RBNZ) kept the rate on hold and signalled it would remain “accommodative” for some time to come.
Its forecast rate track points to the possibility of the first OCR hike coming in December, but it could be pushed into 2027 if the economy doesn’t recover as expected.
House prices fell sharply last year and have continued to be weak.
Data released this week from the Real Estate Institute of New Zealand (REINZ) showed the housing market remained stuck in the doldrums in January.
The Reserve Bank expects house price growth to gradually increase this year and then grow at around the rate of household income growth over the medium term.
While that won’t make home owners feel joyous, it presents an opportunity for New Zealand to reset itself away from relying on the property market to boost wealth.
For too long, Kiwis have traded houses between each other as a form of national sport while younger generations watched their prospects of home ownership slip further away.
House prices shot up unnaturally fast in 2021 and 2022 when the OCR was cut sharply to help bolster the economy during Covid.
Then they crashed. Some stability from here would be good to see. Slow and steady growth, but not shoot your lights out.
Kiwis need to put their capital to use in other places to help New Zealand grow.
If we invest in businesses, it will help create jobs and make the country more attractive for our young people to stay here, rather than move to Australia at the first available opportunity.
Investing more in KiwiSaver would also mean a more comfortable retirement on the horizon.
Pouring more and more money into housing largely benefits the big Australian-owned banks, which export their profits back to Australia.
If New Zealand wants to grow its way out of this downturn, we’ve got to back ourselves, our businesses and our future.
It’s probably not going to feel like we are getting ahead in the short term, but a little bit of pain now will hopefully mean the country has a lot more to gain in the longer term.
Catch up on the debates that dominated the week by signing up to our Opinion newsletter – a weekly round-up of our best commentary.