OCR increase unlikely to affect house prices – REINZ
History suggests the latest increase in the Official Cash Rate by the Reserve Bank is unlikely to significantly affect rising house prices, according to the National Vice President of the Real Estate Institute of New Zealand (Inc), Mr Murray Cleland.
Friday, October 28th 2005, 9:39AM
Increases in the OCR over more than a year have had no apparent affect on the price of residential properties because price pressure arises from demand outstripping supply, Cleland said.“Reports from our members and the most recent days-to-sell figures show that a shortage of listings is the dominant factor in housing price increases, driven by population growth, internal and external migration towards the larger centres and the cost of new home construction.
“The suggestion that the OCR increase is in response to ‘persistent buoyant housing activities and related consumption’ tends to overlook the fact that speculative expectations are not the primary reason for house price rises.
“The rise in house prices over the last couple of years should not be regarded as some sort of evil, rather as a validation of the fact that home ownership is still the preferred savings medium for most new Zealanders.
“As prices rise, so does homeowners’ equity and that increases their ability to leverage that equity to renovate or invest in other properties or businesses.
“The Institute believes that a much greater threat to our economic prospects is the recent collapse in business confidence and looks forward to the Reserve Bank controlling inflation with the wider context of ensuring sustained economic growth”. Cleland said.
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