Interest Rate Rises to Slow Down

The Reserve Bank of New Zealand (RBNZ) has held the Official Cash Rate at 3.5 percent, also reducing the peak rate forecast by 50 basis points to 4.7 percent by 2017.

While interest rate increases are undeniably part of New Zealand’s future, the September Quarter Monetary Policy Statement (MPS) indicates fewer and more spread out hikes than previously forecast as the RBNZ undertakes “a period of monitoring and assessment.”

After four rate hikes this year and the implementation of new high LVR speed limits, the Reserve Bank has decided to weigh up the effects of previous rate rises before administering more.

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New Zealand’s Housing Market in context

Home affordability was a hot topic leading up to this year’s general election, as it has been for some time.

With housing values now 16 per cent above the previous market peak in 2007 it’s easy to see why home buyers might feel discouraged, and many are looking to the government to come up with a solution. Industry experts have said that our house prices are 71 percent overvalued, but that there is no quick fix. So what’s it like in other countries? Are we alone in our housing affordability woes?

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Auckland house prices lower in August

Auckland house sale volumes fell 7.5 per cent in August and the average selling price fell by 1.1 per cent to $711,768, says real estate firm Barfoot & Thompson.

The market is in a wait and see mode, with an election looming as is often the case.

Westpac Bank senior economist Michael Gordon said his seasonally adjusted stats showed another small drop in house sales last month, and ASB Bank senior economist Chris Tennent-Brown said he now expected the Reserve Bank to leave interest rates on hold until March next year.  He said that picking the direction of the housing market over the coming year or two was difficult.

Source and full story: NZ Herald

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