RBNZ Holds Steady As Economy Steadies and Housing Gains Traction

“The RBNZ has held the Official Cash Rate (OCR) at 3.25%, pausing after six consecutive cuts totalling 225 basis points since August last year. This decision signals a shift to a more cautious wait-and-see approach as inflation moderates, the economy stabilises and early signs of housing recovery emerge.

“Inflation has continued to ease, and business surveys suggest pricing pressures will stay weak in the months ahead.

Costs are still rising in areas like construction and rents, but softer consumer demand is making it harder for firms to pass those increases on.

The labour market is also showing signs of softness, unemployment held at 5.1%, and annual wage growth has slowed to 2.9%. Employers remain cautious, with filled jobs declining and headcount still being trimmed.

That said, there are some green shoots. For the first time in over three years, investment intentions have turned positive, with more businesses starting to rebuild capacity on the back of improving confidence and supportive policy settings.

“The latest data from Cotality shows housing markets are showing renewed resilience. National property values rose 0.2% in June, reversing two months of mild declines. Sales activity picked up through May and June, with more listings coming to market and buyer demand building across many regions.

First home buyers are re-emerging, supported by lower mortgage rates and improved serviceability. Hamilton and Christchurch are leading the gains, while Auckland and Wellington remain mixed. Investors are also showing renewed interest, particularly in more affordable areas.”

Outlook

“The RBNZ’s decision to pause reflects improving conditions but also recognises the risks still in play. Global uncertainty, soft domestic demand, and weak business activity could lead to further easing ahead. Markets are pricing in at least one more cut this year, possibly as early as August.

The housing market recovery is expected to continue through winter. Appraisals and buyer interest are lifting across the LJ Hooker network and values are trending higher in key cities. While affordability has improved slightly, it remains stretched.

Even so, the fundamentals (tight supply, strong population growth and falling interest rates) are in place to support further gains through the second half of 2025.”

Campbell Dunoon, Head of Network NZ

Interest rate stability supporting buyer confidence

“The Reserve Bank’s decision to hold the official cash rate at 3.25% was expected to many economists and reflects a balancing act the Bank is maintaining as inflation trends down and the economy stabilises.

For the property market, stable and lower interest rates are already beginning to lift buyer confidence and create more activity in key regions.

“We’ve seen signs in recent months that buyers are returning to the market, particularly first-home buyers and smaller investors who are capitalising on improved affordability.

While overall value growth remains modest and listings are still elevated in some areas, the shift in borrowing conditions is helping to restore momentum—especially in places like Christchurch, Hamilton and Tauranga, which all recorded growth in June.”

Further cuts would further improve market confidence

“While the bank has held rates any further reductions will be even more welcomed by buyers and sellers alike.

Many existing mortgage-holders are still repricing from higher fixed rates, and the prospect of reduced repayments could unlock greater movement later in the year.

“There’s still caution out there—households are watching their budgets —but we’re optimistic that as interest rates track lower and economic confidence improves, we’ll see a more active and balanced market emerge heading into spring.”