by The Landlord
Chief economist Dominick Stephens had been picking 3.5% growth but now expects 7%.
He said Auckland was likely to outperform the rest of the country.
Stephens said his revised forecast was due to a drop in global oil prices. Lower prices would keep inflation down in New Zealand. “As a result it now looks unlikely that the Reserve Bank will increase the OCR in 2015 at all. If anything, financial markets will probably start speculating on the possibility of OCR reductions.”
He said that would lead to a drop in fixed interest rates.
“For the housing market, a further reduction in fixed mortgage rates would be like spiking the punch at a party – things will get raucous, or even a little out of hand. Population growth is booming. The economy is strong. The election has passed. Interest rates are low. Everything points to a housing market resurgence.”
Stephens said his prediction that the market would take off at the end of 2014 had been proved true.
“Real Estate Institute data registered a 14.2% increase in seasonally adjusted house sales for the month of November. That was the biggest monthly increase in house sales since 2008. The REINZ house price index lifted 2.4% in the month, which was the biggest increase in a single month since 2005.”
Auckland had the biggest lift in sales but most other regions reported a strong increase in activity levels.
Stephens said the Reserve Bank would be worried. “With the OCR pinned down at 3.5%, the RBNZ will have only one remaining option for dealing with errant house prices – macroprudential tools. We now expect that at some point over the coming year the Reserve Bank will either tighten its limits on high-LVR mortgage lending, or to enact some other form of macroprudential restriction with a similar effect.
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