New Zealand housing beaten and bruised by Reserve Bank


Last week, the Reserve Bank of New Zealand (RBNZ) sent an arrow through the hearts of Kiwi mortgage holders, hiking the official cash rate (OCR) another 0.5% – the third consecutive double increase.

This decision took New Zealand’s OCR to 2.5%, up from the record low 0.25% in September 2021.

New Zealand mortgage rates have also risen significantly, with fixed rates – which comprise the majority of Kiwi mortgages – nearly doubling from their pandemic lows:

New Zealand standard mortgage rates

Fixed rates have almost doubled from their pandemic lows.


The commentary accompanying the RBNZ’s monetary policy decision remained incredibly hawkish, promising “to maintain its approach of briskly lifting the OCR until it is confident that monetary conditions are sufficient to constrain inflation expectations and bring consumer price inflation to within the target range”.

Today’s shocking inflation data from Statistics New Zealand, therefore, suggests the RBNZ will continue to hike rates aggressively. The consumers price index (CPI) soared 7.3% in the year to June 2022 – the largest annual increase since June 1990:

New Zealand CPI

New Zealand’s CPI highest in 32 years.


Worse, inflation was domestically driven by the housing and household utilities group, due to rising prices for construction and rentals for housing. In particular, prices for the construction of new dwellings increased a whopping 18% annually in the June quarter:

Cost of new dwellings

Cost of dwelling construction hyper inflates.

The latest House Price Index from the Real Estate Institute of New Zealand showed that prices nationally plunged by 5.4% over the June quarter, with every major urban district posting falls.


Given the RBNZ is certain to hike interest rates much further, the house price correction will necessary accelerate. And given New Zealand housing experienced the biggest price boom in the developed world:

New Zealand's housing boom

New Zealand’s house price boom is unmatched.

It stands to reason that New Zealand housing will also experience one of the biggest price busts as interest rates are lifted aggressively.


Kiwis should, therefore, ready themselves for the largest housing correction in living memory. Because it seems nothing will stop the RBNZ from dropping an interest rate sledgehammer on the market.

About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.