Press Release

For immediate release

RBNZ Survey: Median Auckland house price expected to reach $1 million by end of year

        • House prices tipped to jump 6% by end of 2020 in Auckland, Dunedin and Wellington
        • 91% of experts support upping the retirement age in response to national debt
        • All experts and economists surveyed predict the OCR to hold in September

18 September 2020, New Zealand – The median property price in Auckland is set to hit the million-dollar mark by the end of the year, despite the nation officially in recession, according to many of New Zealand’s leading experts and economists.

In this month’s Finder RBNZ Official Cash Rate Survey, 13 experts and economists weighed in on future official cash rate (OCR) moves and other issues related to the state of New Zealand’s economy.

Although the latest GDP figures reflect a 12.2% drop throughout the June quarter, experts predict that house prices will continue to climb. Increases of 6% are expected in Auckland, Wellington and Dunedin, as well as a 5% spike in Christchurch by the end of the year.

In Auckland, this would see the average median house price surpass the million-dollar mark, rising by around $57,000 from $950,000 to $1,007,000, despite the city recently enduring a second lockdown.

Kevin McHugh, Finder’s publisher in New Zealand, said that the Kiwi housing market has defied all predictions.

“New Zealand’s property market has proven to be remarkably resilient in the face of both a global pandemic and now a recession.

“Homeowners were bracing for significant price dips at the start of the pandemic but this hasn’t happened as of yet.

“While this is good news for homeowners, the opposite can be said for those hoping to get a foothold in the market,” McHugh said.

Expected house price increases

CityProjected increase Sept-Dec 2020Current median house price*Projected December house priceIncrease

Experts in favour of increasing retirement age

The overwhelming majority (91%, 10/11) of experts support upping the retirement age after the New Zealand Initiative urged the government to do so, along with cutting KiwiSaver subsidies and stopping contributions to the Superannuation Fund to alleviate the nation’s debt situation.

Michael Redell, economist at Croaking Cassandra, said that the current retirement age no longer reflects workforce participation rates.

“Life expectancy has continued to improve significantly, as has labour force participation for people aged 65-69. Add in the large increase in public debt, and there is no case for keeping the New Zealand Superfund age at 65, where it was first put in 1898,” he said.

Donal Curtin of Economics NZ echoed this sentiment, stating that New Zealand should additionally raise the retirement age to “help preserve the fiscal affordability of what is an effective income support scheme for the elderly”.

Cash rate hold predicted for September

While all experts surveyed (13/13) predict the OCR to hold at 0.25% in September, 69% (9/13) expect a cut in 2021. Of this group, 31% (4/13) expect this to happen in the first quarter of 2021.

Bindi Norwell, chief executive at REINZ and the only expert to predict a rate hike in 2021, said that the nation’s booming property prices will likely be a factor in future moves.

“The housing market is being strongly stimulated by low interest rates. Should the economic fallout of the cessation of government subsidies be less than expected, the RBNZ will likely move to arrest the burgeoning house price inflation,” she said.

According to Debbie Roberts, CEO at Property Apprentice, future OCR rate cuts may come at a cost for first-home buyers.

“I wouldn’t be surprised if the Reserve Bank decreases the OCR on one hand, and re-imposes restrictions on deposit requirements (for property purchases) on the other, to ensure that it doesn’t add further fuel to the booming property market while trying to boost the economy,” she said.

Here’s what our experts had to say

Christina Leung, NZIER: The RBNZ has been actively preparing to use a wider range of alternative monetary policy tools.

Brad Olsen, Infometrics: The New Zealand economy is likely to remain weak into 2020, and we expect the Reserve Bank will move to provide additional support to boost investment if that weakness persists (and we do expect that weakness to persist). The Reserve Bank has clearly signalled that a negative OCR and a Funding for Lending Program are its preferred options if additional monetary policy support are required, and we expect that they will exercise their options once their forward guidance expires.

Alfred Guender, University of Canterbury: Central banks are taking a wait-and-see approach at the moment; RBNZ is no exception and likely to leave policy on hold while trying to get the full picture of the true state of the economy.

Robin Clements, UBS NZ Ltd: Extreme uncertainty, so base case is no change on forecast horizon to December 2021.

Debbie Roberts, Property Apprentice: With the property market absolutely booming across the country despite the fact that we are in the middle of a global pandemic and a general election is right around the corner (which should have by all accounts slowed the property market down), there are so many variables in play at the moment that I suspect the RBNZ will hold off on any change in the OCR until early 2021. We don’t yet know the true impact of the second lockdown, and we might not know this for a few more months yet. After the last lockdown the economy recovered faster than most people were expecting, so my pick would be that unless we increase COVID Alert Levels again, the RBNZ will keep the OCR where it is for a few more months, and then look at decreasing the OCR early in 2021 if required. I wouldn’t be surprised if they decrease the OCR with one hand, and re-impose restrictions on deposit requirements (for property purchases) with the other hand, to ensure that they don’t add further fuel to the booming property market while they try to boost the economy.

Dr Oliver Hartwich, The New Zealand Initiative: The RBNZ has strongly signalled that the rate cut may happen next year.

Bindi Norwell, REINZ: The housing market is being strongly stimulated by low interest rates. Should the economic fallout of the cessation of government subsidies be less than expected, the RBNZ will likely move to arrest the burgeoning house price inflation.

Ashley Church, The Governor has given an assurance that he won’t make a further move until March 2021 – but after that, the pressure will be downward.

Donal Curtin, Economics New Zealand Ltd: While they should probably do it earlier, they appear to be committed to delivering on their previous forward guidance of no change till next year.

Kelvin Davidson, CoreLogic: For me, the odds of a negative OCR in early 2021 have grown, but not yet convinced it’ll be needed.

Jarrod Kerr, Kiwibank: The RBNZ should use its other tools.

Sharon Zollner, ANZ NZ: Have committed to not changing the OCR before March, meaning the first opportunity is April. Has made it clear they favour a negative OCR as the next step. Therefore we are forecasting a 50bp cut at the April Monetary Policy Review.

Michael Reddell, Croaking Cassandra: Although there is a strong case for a cut immediately, even just to zero, the Bank has reiterated that OCR cuts are off the table until next year.


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