Inflation has been one of the main themes throughout 2023 and has left many of us feeling just a little squeezed when it comes to buying our groceries, filling the car or visiting our favourite restaurant. The term ‘stubborn inflation’ has been thrown around a lot and labour market data out this week shows that while things are starting to slow, they aren’t yet slowing at a pace fast enough to leave the Reserve Bank confident about inflation returning to below their below 3% inflationary target.
ASB this week has predicted that the Official Cash Rate (OCR) will need to remain at it’s current 5.50% level right through until February 2025, meaning little relief for mortgage holders for the near term. They are however predicting a reasonably robust trimming phase at this point taking the OCR back down to around 3.0% by mid-2026 which would see the shorter-term interest fixed rates falling back below 5% at this point.
On the housing front, we have seen surprisingly strong inward migration figures (increased housing demand), rising rents, falling new build construction volume (decreased supply with new build consent numbers down a staggering 37% from just 12m earlier), higher build costs (more expensive supply) and improved buyer and business sentiment with factors such as the anticipation of a National-led government installing investment confidence and signalling of a restoration of interest cost deductibility on rental properties. These factors point toward robust house price growth in the coming months and years.
For home owners and rental property owners who are feeling a little stretched currently, if you can safely navigate through the next 18m, brighter times appear to lay ahead.
Disclaimer: Winston Peters is a significant unknown quantity and we will all likely be subject to Winnie’s Whims….