Reserve Bank battles housing market rebound


Like Australia, New Zealand is experiencing a post-pandemic immigration boom, with net overseas migration a hitting record high 118,800 in the year to September:


Source: Statistics New Zealand

According to independent economist Tony Alexander, this 2.3% boost to New Zealand’s population “means upward pressure on rents and house prices because these people need about 43,000 extra houses to live in”.

Indeed, the Real Estate Institute of New Zealand’s House Price Index bottomed out three months ago:

New Zealand house prices

Source: Tarric Brooker

Monthly mortgage data from the Reserve Bank likewise shows that total monthly new mortgage commitments were $5.778 billion in October, up from $5.194 billion in September 2023 and up from $5.582 billion in October 2022.

The next chart shows the data in trend terms. It shows that the value of mortgage commitments was 4% higher in October 2023 than the corresponding month of last year:

New Zealand mortgage commitments

Like in Australia, the Reserve Bank is fighting a tug-of-war against rising demand from record levels of immigration, which is being reflected most clearly in the housing market.

While most bank economists expect the Reserve Bank to keep the official cash rate (OCR) on hold at 5.50% at its November and February meetings, there is the chance that the rebound in population-driven demand could force it to push rates higher, or at least keep the OCR higher for longer.

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.