October 9, 2024 • 5 mins
Today's OCR announcement has got everyone thinking about what impact it will have on the housing market.
The Reserve Bank cut for a second time from 5.25% to 4.75%.
CoreLogic's Chief Property Economist Kelvin Davidson joins Jack Tame to discuss when it will flow on to home loans.
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Speaker 1 (00:00):
Being.
Speaker 2 (00:00):
Today's OCR announcement has got us all thinking about what
impact it's going to have on the housing market. The
RB and Z cut for the second time fifty basis points,
this time around from five point twenty five to four
point seventy five. So when can we start to see
this flow on to home loans and the housing market
at large. Core Logic's chief property economist, Calvin Davidson is
(00:21):
with us this evening ten arquare good evening, good evening,
big win.
Speaker 1 (00:25):
Well it is. Yeah, if you're a mortgage biro, it's
certainly a big one. We're going to see mortgage or
ats fall further. I whan they've already been decline, but
probably further falls from here. So I think I direct
boast housing sentiments and probably a boast of house prices
in terms of bringing the recent downturned to an end. Yeah.
Speaker 2 (00:43):
I'll ask about house prices in a second, because obviously
that's one of the flow on effects from this. But
how are you expecting the banks to react? Already we've
seen a fair bit of action today. Are they going
to be trying to outdo each other in the coming weeks?
Speaker 1 (00:55):
Yeah? Well, I think what we're really saying in the
housing market at the moment is it's fairly quiet. We're
not seeing many sales. It's quite quiet in terms of activity,
so banks are competing for that market share. It's about
trying to win market sharing relatively quiet market. So yeah,
I think we'll see some fairly good rates coming through
as those banks trying to win those customers. So I
(01:16):
think if you've got quite a mortgage, there's a good
news head.
Speaker 2 (01:19):
Yeah, Calvin, there's a lot of debate over where the
neutral cash rate should be. But if next week's CPI
data shows that inflation New Zealand inflation in New Zealand
is within the target band and somewhere nearer to two
percent than three percent, is there an on an argument
that perhaps the OCI should be cut even further.
Speaker 1 (01:39):
Yeah, well, that's possibly a narrative that's going to start
coming through because the neutral rate is demanded to be
about three percent. It's definitely not a precise science, but
if it is somewhere around there and where we're still
currently at four point seventy five, then I think there
is an argument to say you try and get there
as quick as possible, especially if inflation is coming down
quickly and perhaps roving the rescue of it even going below.
(02:00):
So that could be a bit of commentary that starts
coming out. But also I guess the Reserve Bank just
want to observe the days. You're going to give these
things time to book their way through, so I'd anticipate
the steady path. But that argument might start just.
Speaker 2 (02:14):
How much pent up demand is there in the property market.
Speaker 1 (02:19):
There's probably a little bit. I mean, certainly from existing
in occupiers. We haven't seen a lot of people moving
around lately. There's been a lot of activity from first
time buyers, but existing in occupiers have been but quieter
the normal, and also investors have been a bit quieter
than normal. So as interest rates for finance and conditions
get a bit easier, we could start to see them
coming back out of woodwork, and I think investors will
(02:40):
certainly be an interesting story in twenty twenty five, there's
mortgage rates come down and prits those rental fields improvement,
but top ups to keep these properties going shrink and
they could start to become a bit more interested again.
Speaker 2 (02:53):
Yeah, to talk to us about that a bit more.
How much more activity do you think we're going to
see from investors, or where does the see our need
to be before investors start getting really interested.
Speaker 1 (03:04):
The level will differ depending on each individual investor how
much equally they have that sort of thing. But certainly,
if the our CR keeps falling, where we see it
fall towards that three percent, forget in approaps the next
year or so, you can easily see mortgage rates down
towards the five five and a half percent range, which
I think is probably where things would start to get
a lot more interesting for investors. Now. On the other hand,
(03:28):
we've also got lending rules in place there, and in
particular the debt to income ratio caps and faster mortgage
rates fall, the sooner those DT eyes will kick in,
which will tend to work in the other direction, and
they are they're range at the entire property market, but
I think it probably will be investors who will feel
DT eyes a bit more. So it's go a interesting
year for investors. Low mortgage rates help, but at the
(03:49):
same time DT eyes might push in the other direction.
Speaker 2 (03:52):
Yeah right, Yeah, you kind of got two competing forces there,
the accelerator and the brake pedal being hit at once.
So what are you expecting in terms of house prizes
over the next week period.
Speaker 1 (04:02):
Well, I think what we've seen over the past five
or six months is that prices have been falling. I
suspect that could end pretty soon because we're seeing a
sentiment boost already from lower and morgitrates, not to mention
the direct impact on finances. So I think this little
downturn will probably end pretty soon, but not necessarily sure
that turns into a major upturn either, because of course
(04:23):
jobs are being lost, so we can labor market certainly
is a challenge for the house of market. There's still
a lot of listings out there, so buyers do have
the pricing power, and then of course the debt to
incumb ratio restrictions kicking in as morgaitrates fall, So I
think preps the downturn ends, but also not necessarily an
upturn starting straight away either. So I fairly feel sort
(04:43):
of quiet tow our eighteen months.
Speaker 2 (04:45):
Yeah. Right, when we look at the RB and Z
commentary from today, I mean, only so much you can
read into for a November cup. Given November then goes
into what is almost three months before their next decision.
Where do you think we are sitting in terms of
the Reserve Bank's next move.
Speaker 1 (05:02):
Yeah. I think if the data involves as we think it, well,
if we still see some weakness out of there the economy,
we see inflation playing ball and behaving nicely and continuing
to Ford, and I think you have to be looking
at another point. Five percent cut in November gives that
sort of relief over that Christmas period and they come
back and assess in the new year. So you're probably
(05:24):
looking at another point fok sink cup, provided the data
goes to plan.
Speaker 2 (05:28):
All right, Calvin, appreciate it. Thank you. Calvin Davidson is
core Logic's chief property economist. Thirteen past six. For more
from Hither Duplessy Allen Drive, listen live to news talks
it'd be from four pm weekdays, or follow the podcast
on iHeartRadio
Being.
Speaker 2 (00:00):
Today's OCR announcement has got us all thinking about what
impact it's going to have on the housing market. The
RB and Z cut for the second time fifty basis points,
this time around from five point twenty five to four
point seventy five. So when can we start to see
this flow on to home loans and the housing market
at large. Core Logic's chief property economist, Calvin Davidson is
(00:21):
with us this evening ten arquare good evening, good evening,
big win.
Speaker 1 (00:25):
Well it is. Yeah, if you're a mortgage biro, it's
certainly a big one. We're going to see mortgage or
ats fall further. I whan they've already been decline, but
probably further falls from here. So I think I direct
boast housing sentiments and probably a boast of house prices
in terms of bringing the recent downturned to an end. Yeah.
Speaker 2 (00:43):
I'll ask about house prices in a second, because obviously
that's one of the flow on effects from this. But
how are you expecting the banks to react? Already we've
seen a fair bit of action today. Are they going
to be trying to outdo each other in the coming weeks?
Speaker 1 (00:55):
Yeah? Well, I think what we're really saying in the
housing market at the moment is it's fairly quiet. We're
not seeing many sales. It's quite quiet in terms of activity,
so banks are competing for that market share. It's about
trying to win market sharing relatively quiet market. So yeah,
I think we'll see some fairly good rates coming through
as those banks trying to win those customers. So I
(01:16):
think if you've got quite a mortgage, there's a good
news head.
Speaker 2 (01:19):
Yeah, Calvin, there's a lot of debate over where the
neutral cash rate should be. But if next week's CPI
data shows that inflation New Zealand inflation in New Zealand
is within the target band and somewhere nearer to two
percent than three percent, is there an on an argument
that perhaps the OCI should be cut even further.
Speaker 1 (01:39):
Yeah, well, that's possibly a narrative that's going to start
coming through because the neutral rate is demanded to be
about three percent. It's definitely not a precise science, but
if it is somewhere around there and where we're still
currently at four point seventy five, then I think there
is an argument to say you try and get there
as quick as possible, especially if inflation is coming down
quickly and perhaps roving the rescue of it even going below.
(02:00):
So that could be a bit of commentary that starts
coming out. But also I guess the Reserve Bank just
want to observe the days. You're going to give these
things time to book their way through, so I'd anticipate
the steady path. But that argument might start just.
Speaker 2 (02:14):
How much pent up demand is there in the property market.
Speaker 1 (02:19):
There's probably a little bit. I mean, certainly from existing
in occupiers. We haven't seen a lot of people moving
around lately. There's been a lot of activity from first
time buyers, but existing in occupiers have been but quieter
the normal, and also investors have been a bit quieter
than normal. So as interest rates for finance and conditions
get a bit easier, we could start to see them
coming back out of woodwork, and I think investors will
(02:40):
certainly be an interesting story in twenty twenty five, there's
mortgage rates come down and prits those rental fields improvement,
but top ups to keep these properties going shrink and
they could start to become a bit more interested again.
Speaker 2 (02:53):
Yeah, to talk to us about that a bit more.
How much more activity do you think we're going to
see from investors, or where does the see our need
to be before investors start getting really interested.
Speaker 1 (03:04):
The level will differ depending on each individual investor how
much equally they have that sort of thing. But certainly,
if the our CR keeps falling, where we see it
fall towards that three percent, forget in approaps the next
year or so, you can easily see mortgage rates down
towards the five five and a half percent range, which
I think is probably where things would start to get
a lot more interesting for investors. Now. On the other hand,
(03:28):
we've also got lending rules in place there, and in
particular the debt to income ratio caps and faster mortgage
rates fall, the sooner those DT eyes will kick in,
which will tend to work in the other direction, and
they are they're range at the entire property market, but
I think it probably will be investors who will feel
DT eyes a bit more. So it's go a interesting
year for investors. Low mortgage rates help, but at the
(03:49):
same time DT eyes might push in the other direction.
Speaker 2 (03:52):
Yeah right, Yeah, you kind of got two competing forces there,
the accelerator and the brake pedal being hit at once.
So what are you expecting in terms of house prizes
over the next week period.
Speaker 1 (04:02):
Well, I think what we've seen over the past five
or six months is that prices have been falling. I
suspect that could end pretty soon because we're seeing a
sentiment boost already from lower and morgitrates, not to mention
the direct impact on finances. So I think this little
downturn will probably end pretty soon, but not necessarily sure
that turns into a major upturn either, because of course
(04:23):
jobs are being lost, so we can labor market certainly
is a challenge for the house of market. There's still
a lot of listings out there, so buyers do have
the pricing power, and then of course the debt to
incumb ratio restrictions kicking in as morgaitrates fall, So I
think preps the downturn ends, but also not necessarily an
upturn starting straight away either. So I fairly feel sort
(04:43):
of quiet tow our eighteen months.
Speaker 2 (04:45):
Yeah. Right, when we look at the RB and Z
commentary from today, I mean, only so much you can
read into for a November cup. Given November then goes
into what is almost three months before their next decision.
Where do you think we are sitting in terms of
the Reserve Bank's next move.
Speaker 1 (05:02):
Yeah. I think if the data involves as we think it, well,
if we still see some weakness out of there the economy,
we see inflation playing ball and behaving nicely and continuing
to Ford, and I think you have to be looking
at another point. Five percent cut in November gives that
sort of relief over that Christmas period and they come
back and assess in the new year. So you're probably
(05:24):
looking at another point fok sink cup, provided the data
goes to plan.
Speaker 2 (05:28):
All right, Calvin, appreciate it. Thank you. Calvin Davidson is
core Logic's chief property economist. Thirteen past six. For more
from Hither Duplessy Allen Drive, listen live to news talks
it'd be from four pm weekdays, or follow the podcast
on iHeartRadio
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