The Reserve Bank's decision today to increase the Official Cash Rate (OCR) has been anticipated by most financial markets and should come as no surprise to borrowers, homeowners, and investors. The increase of 25 basis points has taken it from 2.50% to 2.75%
While some economists questioned whether a further increase was necessary, the move reflects the Reserve Bank's ongoing focus on managing inflation and supporting long-term economic stability. More importantly, in terms of impact on the housing market, this is a relatively modest increase and is unlikely to significantly alter borrowing behaviour or market activity.
Professionals Group New Zealand Chief Executive Shaun Taylor believes the broader outlook for residential property remains encouraging.
"Although I agreed with the economists who believed a further OCR increase wasn't necessary, today's move was well forecast and is unlikely to have a significant impact on lending costs. Even after this adjustment, borrowing costs remain relatively low by historical standards. On the surface, the signs for the housing market remain positive, particularly in terms of transaction volumes and buyer engagement. While some vendors in certain regions may still be waiting for stronger price growth, the overall market continues to demonstrate resilience, confidence, and steady activity."
So, why can property owners, buyers, and sellers remain optimistic?
1. Sales Volumes Continue to Increase over time
One of the strongest signs of a healthy property market is activity. Across many parts of New Zealand, transaction volumes have continued to improve. Buyers are returning to the market, open homes are attracting good attendance, and enquiry levels remain strong.
While price movements often dominate headlines, sales volumes are typically the clearest indicator of market confidence. People are making decisions, securing finance, and transacting. Realistic vendors who take the advice of their real estate agents are selling. That's a positive signal for the wider property sector.
2. Property Prices Are Remaining Stable
Despite economic uncertainty over recent years, property values across much of New Zealand have demonstrated remarkable resilience. Regions connected to primary industries such as dairy and agriculture are seeing some value increases, while the bigger cities of Auckland and Wellington, where there has been a historically high level of new builds released to the market in the last 5 years, are seeing the impact of that supply in stable house prices.
Stable pricing provides confidence for both buyers and sellers. Purchasers can enter the market knowing they're buying into an environment with fewer fluctuations, while vendors can make plans based on realistic market expectations. Importantly, stability often creates the foundation for future growth.
Property markets throughout New Zealand are never uniform. While some areas continue to experience flat conditions, others are already recording increases in demand and price growth, as local economic conditions strengthen.
3. Construction Cost Growth Has Become More Predictable
Recent construction sector data highlights another positive development. According to Cotality's latest Cordell Construction Cost Index, residential construction costs rose by 1.1% during the June quarter, with annual growth increasing to 3.5%. While costs continue to rise, the industry is no longer experiencing the rapid and often unpredictable inflation seen during the pandemic period.
Cotality notes that current cost increases are tracking much closer to long-term averages, reflecting a gradual recovery in building activity rather than supply chain disruptions or extraordinary inflationary pressures.
For homeowners considering a build, developers assessing projects, and investors evaluating opportunities, greater predictability around construction costs provides improved confidence and planning certainty.
4. Long-Term Market Fundamentals Remain Strong
Perhaps the most important factor is that the underlying drivers of the New Zealand economy and the property market remain intact. New Zealand continues to face housing demands driven by population growth, changing household needs, infrastructure development, and a strong cultural preference for home ownership.
Today's OCR increase does not change these fundamentals. Instead, it signals an economy that remains resilient, with the Reserve Bank maintaining confidence in broader economic conditions. For many buyers and sellers, the long-term outlook remains far more important than a single 25-basis-point adjustment.
Looking Ahead to Spring
As we enter the traditionally busy spring selling season, market conditions continue to favour those who are prepared and realistic. Buyers remain active, transaction volumes are improving, lending remains accessible, and confidence is steadily returning to the market.
While vendors hoping for rapid price escalation may need to remain patient in some locations, the combination of increased activity, stable prices, and positive long-term fundamentals provides plenty of reasons for optimism. For homeowners considering a move this spring, now is the ideal time to seek expert advice and understand the opportunities available in their local market.
If you're thinking about selling this spring, contact your local Professionals office. Our experienced teams are ready to help you navigate the market with confidence and achieve the best possible outcome for your property.