Rising Interest Rates Hit NZ Housing Market from Multiple Angles

ANZ New Zealand's economists say the country's housing market is facing significant headwinds, with rising interest rates likely to be the most important factor. In their latest Property Focus report, they state that the Reserve Bank will hike interest rates in the next two meetings to take the Official Cash Rate (OCR) to its neutral level of around 3%, before pausing to assess incoming data.

The Reserve Bank's upcoming review dates are September 2nd, October 28th, and December 9th. Financial markets currently place a 50/50 odds on a follow-up hike in October, with another full hike priced in by December.

ANZ NZ's economists also note that the current environment is less favorable for housing investors, citing low rental yields compared to mortgage rates. This suggests that the cost of financing and owning a home remains high relative to the rental income it generates for investors.