What will the Reserve Bank do next?

At the time of writing, we’re waiting on news of the Reserve Bank’s April meeting. Will our historically low cash rate drop even further?

After the surprise rate reduction in early March, many experts started commenting on what the future may hold.

Chief economist of ANZ, Cameron Bagrie, has predicted another two interest rate cuts this year as the central bank seeks to offset higher bank funding costs.

Westpac has been predicting since June 2015 that the Reserve Bank would lower the cash rate to 2 per cent. Westpac’s chief economist Dominick Stephens agreed it was quite possible it could drop even further, to below 2 per cent.

With the March announcement that the official cash rate would drop to 2.25 per cent, the central bank hinted another cut could be coming and it’s widely expected that the Reserve Bank will deliver another cut to 2 per cent at some point in 2016.

So what does the lowest cash rate in our country’s history mean for property markets? BNZ released a report after the rate cut that looked at activity in Auckland:

  • There are signs that Chinese buyers are returning. If this is true, then extra demand lies ahead.
  • There remains a big pool of young people wanting to buy property..
  • Net migration inflows are not only high and expected to stay high, they are still growing.
  • The number of dwelling consents being issued in Auckland is running at about half the number needed just to stabilise the shortage at current levels.

For the past few months, since new government regulations came into play, the Auckland housing market showed signs of slowing and we’ve all watched closely to see if this was a pause, or a complete slowdown.

As BNZ’s report shows, the Auckland market seems to be sparking back into life since the latest easing of monetary policy. We’ve discussed this more in the ‘What’s Trending’ section below.