About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds Other Sites:   tmmonline.nz  |   landlords.co.nz
Last Article Uploaded: Thursday, February 20th, 10:04PM
rss
Latest Headlines

Rising house prices glossed over in MPS

New Zealand’s housing market is rebounding strongly but the Reserve Bank barely mentioned it in Wednesday’s Monetary Policy Statement (MPS). That’s left one economist asking why.

Thursday, February 13th 2020, 11:49AM 1 Comment

by The Landlord

In its latest MPS this week, the Reserve Bank’s Monetary Policy Committee kept the Official Cash Rate (OCR) on hold at its record low of 1.0%.

It also took a more upbeat view of on economic growth, saying it is expected to accelerate over the second half of 2020 and that the outlook for the economy was brighter amid increased infrastructure investment from the government.

Despite the potential economic impact of coronavirus, the Reserve Bank’s forecast OCR track now has no further cuts pencilled in and has a hike forecast for 2021.

The general feeling among economists was that the Reserve Bank might be underestimating the threat posed by coronavirus.

But for Westpac’s chief economist, Dominick Stephens, it was the lack of reference to the housing market that stood out.

“What surprised us was that the Reserve Bank studiously avoided mentioning house prices in the press release or the Summary Record of Meetings – to the point of awkwardly dancing around the topic with phrases like ‘rising household wealth’.”

This was a glaring omission and could be because it fears copping criticism for rising house prices, Stephens says.

“The recent turnaround in the housing market is the most obvious consequence of lowering interest rates and is a key channel through which monetary policy is currently working.”

The Reserve Bank does mention that stronger-then-expected house price inflation will drive higher consumer spending, and upgrades forecasts for both, in the MPS.

Stephens says this is presumably a key reason for the upgraded OCR outlook, yet it was not mentioned up front and there is no record of the Committee discussing it.

Westpac believes that the housing market will heat up more than the Reserve Bank expects, he says.

“The Reserve Bank is forecasting peak of 7.7% house price growth, but it continues to forecast an unrealistically rapid cooling in the market.

“That is not going to happen as long as mortgage rates remain low. We expect a slightly higher peak rate of house price inflation, and a longer-lasting period of rising prices.”

However, this would not be enough to deter the Reserve Bank from cutting the OCR in an environment of weaker global economic sentiment, Stephens adds.

“The Reserve Bank expects to keep the OCR on hold this year, unless coronavirus blows up into something severe for New Zealand.

“Despite that, we are forecasting an August OCR cut based on our view that the Reserve Bank will be surprised on certain aspects of the economy.”

Tags: house prices housing market interest rates investment Mortgage Rates mortgages OCR OCR forecasts RBNZ Reserve Bank Westpac

« Don't use KiwiSaver for investment property - yetHeartland launches reverse mortgages for investors »

Special Offers

Comments from our readers

On 14 February 2020 at 1:30 pm Winka said:
Mmmmm, like everyone else. i cannot predict the day of "Armageddon" re our economy nor the Global economy.

However, there is a general agreement that a "big bankg" correction is overdue.
Are investors (property) best to take (a) the option of holding current porfolios (or even adding to it?)and reaping a 7% growth or (b) cashing out (or cancelling any further additions) and missing out.

Fear & Greed are the normal factors to take over.

DEBT is the ever present problem now...Globally.
And that includes household DEBT.
Household DEBT has increased in recent years because the "other half" has joined the workforce to help service the extra DEBT taken on by plucking some of that extra equity to buy a Fiji holiday (even while we are suffering a scorching heat here approaching 30 degrees) plus a new Haines Hunter, and a new Ranger to row it.

This is what people have decided to enjoy...instead of decreasing their mortgage loan.

So...when is this inevitable financial Armageddon going to happen

I reckon exactly 5 months give or take 7 days
That is approximately 27 days after Coronavirus has kicked into a full blown global pandemic affecting between 63% to 64% of world population (as predicted by qualified European authorities 3 days ago).

There you go.
A prediction nearly to the day.....unheard of agree?

Now let's read any other opinions as they come in??

Sign In to add your comment

 

print

Printable version  

print

Email to a friend
News Bites
Latest Comments
Subscribe Now

Mortgage Rates Newsletter

Daily Weekly

Previous News

MORE NEWS»

Most Commented On
Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
ANZ 5.19 3.95 4.15 4.49
ANZ Special - 3.45 3.65 3.99
ASB Bank 5.20 3.89 4.05 4.39
ASB Bank Special - 3.39 3.55 3.89
Bluestone 4.44 4.44 4.29 4.34
BNZ - Classic - 3.49 3.55 3.89
BNZ - Mortgage One 5.90 - - -
BNZ - Rapid Repay 5.35 - - -
BNZ - Std, FlyBuys 5.30 4.45 4.35 4.55
BNZ - TotalMoney 5.30 - - -
China Construction Bank 5.50 4.70 4.80 4.95
Lender Flt 1yr 2yr 3yr
China Construction Bank Special - 3.19 3.19 3.19
Credit Union Auckland 5.95 - - -
Credit Union Baywide 5.65 4.75 4.75 -
Credit Union North 6.45 - - -
Credit Union South 5.65 4.75 4.75 -
Finance Direct - - - -
First Credit Union 5.85 3.99 4.49 -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 4.65 4.80 -
HSBC Premier 5.24 3.54 ▼3.20 3.69
Lender Flt 1yr 2yr 3yr
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 5.15 3.18 3.18 3.20
Kainga Ora 5.18 3.97 4.05 4.39
Kiwibank 5.15 4.20 4.30 4.64
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
Kiwibank Special - 3.45 3.55 3.89
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 5.70 4.25 4.15 -
Lender Flt 1yr 2yr 3yr
Pepper Money Near Prime 5.64 - 5.44 5.44
Pepper Money Prime 5.18 - 4.98 4.98
Pepper Money Specialist 7.59 - 7.39 7.39
Resimac 4.50 4.45 3.89 3.94
RESIMAC Special - - - -
SBS Bank 5.29 4.85 5.05 5.49
SBS Bank Special - 3.39 3.55 3.89
Sovereign 5.30 3.89 4.05 4.39
Sovereign Special - 3.39 3.55 3.89
The Co-operative Bank - Owner Occ 5.15 3.49 3.59 3.89
The Co-operative Bank - Standard 5.15 3.99 4.09 4.39
Lender Flt 1yr 2yr 3yr
TSB Bank 6.09 4.19 4.35 4.69
TSB Special 5.29 3.39 3.55 3.89
Wairarapa Building Society 5.50 3.95 4.05 -
Westpac 5.34 4.15 4.09 4.49
Westpac - Offset 5.34 - - -
Westpac Special - 3.39 3.55 3.99
Median 5.34 3.96 4.09 4.39

Last updated: 14 February 2020 10:02am

News Quiz

The maximum remuneration model for Australian life insurance advisers is to be set at what?

Upfront 40% + trail 20%

Upfront 50% + trail 10%

Upfront 50% + trail 20%

Upfront 60% + trail 10%

Upfront 60% + trail 20%

MORE QUIZZES »

About Us  |  Advertise  |  Contact Us  |  Terms & Conditions  |  Privacy Policy  |  RSS Feeds  |  Letters  |  Archive  |  Toolbox
 
Site by Web Developer and eyelovedesign.com