OCR Hike Fuels Cautious Market Sentiment Amid Election Jitters

The Reserve Bank of New Zealand (RBNZ) has maintained its stance on interest rates by lifting the Official Cash Rate (OCR) to 2.75% last week, aligning with market expectations. This move brings the OCR closer to a neutral mark of around 3%, as inflation remains high and economic growth shows signs of improvement.

According to Ed McKnight, an economist at ShareOpes Partners, New Zealand's house prices have historically been impacted by election outcomes. Analyzing every election since 1993, he found that property values tend to be more subdued in the months leading up to voting day and may drop after the election.

The current market sentiment remains cautious among buyers and sellers, with mortgages a major concern due to recent interest rate increases. However, it's likely that these rises have already been factored into fixed rates. Property values are also experiencing a downward trend, with a 0.4% monthly drop in the nationwide median value and a 0.5% drop in Auckland's median value.

New dwelling consents continue to rise, with 3579 new dwellings consented in July, a 10% increase from the same month last year. This trend may be short-lived as builders are having to pass on input cost increases to customers, making it challenging for property values to rise significantly.