RBNZ Survey: 75% Of Experts Say Government Should Do More To Address Housing Affordability

News highlights:

• 55% of experts say that government policies are allowing rental prices to increase too high
• 2 in 3 agree that tourism to and from Australia is essential for the New Zealand economy 
• All economists predict an OCR increase in February 

21 February 2022, New Zealand – Three in four experts think the government should do more to curb skyrocketing house prices, as another rate rise looms.

In this month’s Finder RBNZ Official Cash Rate Survey, 14 experts and economists weighed in on future OCR moves and other issues relating to the state of New Zealand’s economy.

All experts surveyed (100%, 14/14) predict that the OCR will increase again in February from the current 0.75%.

The majority of respondents (75%, 9/12) who weighed in* believe that the government should do more to address housing affordability issues.

Kate Browne, personal finance expert at Finder, said the days of cheap mortgage rates were over.

“Kiwi borrowers who purchased over the last few years at rock-bottom rates should be prepared for their mortgage costs to start to climb.

“The predicted cash rate rise is likely to slow property growth, but how much remains to be seen.”

Government policies could be doing more, according to experts

Half of the experts (55%, 6/11) who weighed in believe that government policies, such as the extension of the bright-line test to 10 years, are allowing rental prices to increase too far.

Dr Oliver Hartwich from The New Zealand Initiative said making things unattractive to landlords would naturally result in a reduction of rental supplies. 

“Combined with the recent increase in property prices, this means there will be upward pressure on rents even if the property market slows down,” Dr Hartwich said.

Michael Reddell of Croaking Cassandra economic commentary blog agreed.

“Government policies have failed to seriously address the land-use regulatory issue, which underpin house prices and rents,” Reddell said.

Cost of living remains tough, however wage growth looks positive 

Finder's Economic Sentiment Tracker gauges experts' confidence in 5 key indicators: housing affordability, employment, wage growth, cost of living and household debt over the next 6 months.

While the majority of experts (79%, 11/14) are feeling positive towards wage growth, negativity towards the cost of living remains relatively high.

Browne said there had been a mild improvement towards cost of living.

“In November last year, we saw a whopping 70% of experts say they felt negative towards the cost of living. 

“This has improved slightly, but there’s still a long way to go.

“Positivity towards wage growth is welcome news, with growing wages helping to make things like home ownership more attainable.”

The path to economic growth and recovery

Almost 2 in 3 experts (64%, 7/11) who weighed in agree that tourism to and from Australia is essential for the New Zealand economy to recover.

Ashley Church of ashleychurch.com noted that getting left behind as the rest of the world opens up was the biggest roadblock for the New Zealand economy in 2022. 

Leonie Freeman of Property Council New Zealand agreed, noting that border restrictions and lack of certainty on future changes in alert levels was a huge roadblock for the economy. 

Jarrod Kerr of Kiwibank said that Omicron, and other variants, will throw up the biggest challenges to the Kiwi economy.

All experts (100%, 13/13) who weighed in expect to see an above-average rise in inflation in 2022.

*Experts are not required to answer every question in the survey

Here’s what our experts had to say:

Sharon Zollner, ANZ NZ: "Persistent inflation pressure."

Ashley Church, ashleychurch.com: "Because the Reserve Bank will want to tame to inflation demon as soon as it can."

Saten Kumar, Auckland University of Technology: "Inflation has gone up and it may continue to climb up. Most likely the RBNZ will further increase cash rate in the forthcoming announcement."

Kelvin Davidson, CoreLogic: "Inflation is above target (and could stay there for a while) and unemployment is very low. The mandate is pretty clear for a series of OCR increases."

Michael Reddell, Croaking Cassandra: "Core inflation is outside the target range, and yet the OCR is still below pre-Covid levels. They need to raise the OCR quite a lot now, but beyond that, there is a lot of uncertainty."

Donal Curtin, Economics New Zealand: "Inflation is higher than desirable, and continues to surprise on the upside, so RBNZ's stated path of reducing the extent of monetary policy stimulus remains appropriate"

Jarrod Kerr, Kiwibank: "We believe the RBNZ will lift the cash rate at every meeting this year. We expect the cash rate to hit 2.5% in November, up for 0.75% today."

Christina Leung, NZIER: "High inflation pressures, with risk of inflation expectations becoming unanchored."

Paul Roberts, Property Apprentice: "With inflation at the highest rate we've seen in many years, and higher than most predictions, there is very little likelihood that the RBNZ will do anything other than increasing the OCR this month."

Leonie Freeman, Property Council New Zealand: "It will follow international trends of rate rises."

Dr Oliver Hartwich, The New Zealand Initiative: "Inflation and inflation expectations are increasing. The RBNZ needs to work against it before such expectations solidify."

Robin Clements, UBS NZ: "25bp per MPS."

Alfred Guender, University of Canterbury: "The RBNZ is expected to continue on its path to restore more normal monetary conditions. Measured but steady increases in the OCR are likely in the near future. The somewhat high current CPI inflation rates are likely to abate once the bottlenecks in the supply chain are removed."

Michael Gordon, Westpac: "The RBNZ will need to take the heat out of domestic demand in order to rein in inflation, and a key channel for that is via the housing market. Mortgage rates have risen in anticipation of OCR hikes and are clearly having the desired effect, but to finish the job, the RBNZ needs to follow through on those hikes."

© Scoop Media