Reserve Bank Announcement Good for Property Market

Reserve Bank Announcement Good for Property Market

Property prices and the current stability of the housing market will not be adversely effected by the 0.25 percentage point increase in the Official Cash Rate says the Real Estate Institute of New Zealand (REINZ).

“In fact home buyers are being promised a market environment in which they can safely plan long term as Reserve Bank Governor Dr Alan Bollard has indicated any further increases in the OCR will be only gradual if needed at all,” says REINZ President Peter McDonald

Because more than 30 percent of mortgage debt is now on floating rate and long-term interest rates are higher than short-term interest rates, Dr Bollard said the OCR will not need to be increased at the same speed as in previous recoveries.

“Interest rates are only one of many factors which influence the property market,” says Mr McDonald. “While Dr Bollard notes that households continue to be cautious about investing in homes, median prices are still up on a year ago as we have not yet caught up on the supply shortage caused by the fall in the building of new houses during the recession.”

“It must also be reassuring for home buyers and investors that the Reserve Bank has found clear signs we are well into a recovery with businesses planning increased investment and unemployment still trending downwards,” says Mr McDonald. “ So those people who have been holding off on plans to buy a home can be confident it is a good time to go ahead.”

ENDS

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