The Reserve Bank's OCR cut has sparked renewed interest from developers and investors seeking new opportunities.
The
50-basis-point reduction, which brings the OCR to a two-year low of 4.25%, has
boosted market confidence and signaled a potential rebound. The fear of
missing out on historically low prices is prompting developers to reconsider
the benefits of landbanking for future projects. However, careful pipeline
planning remains essential, as long lead times often require substantial
upfront investment years before returns are realized.
At a press conference, Reserve Bank Governor Adrian Orr
stated:
“If economic conditions continue to evolve as projected, the committee expects
to lower the OCR further early next year. Slowing inflation and a subdued
economy justify a second consecutive significant cut.”
Inflation in New Zealand has returned to the Reserve Bank’s
target range of 1–3%, a notable milestone. Consumer prices increased by just
0.6% in the third quarter, reducing the annual inflation rate to 2.2% - the
lowest in over three years. This decline has been driven largely by a 1.6%
annual drop in the cost of imported goods, or “tradable” inflation, though
non-tradable inflation remains elevated.
The Monetary Policy Committee (MPC) commented:
“Annual consumer price inflation has declined and is now close to the midpoint
of our 1–3 percent target band. Inflation expectations are aligning with the
target, and core inflation is converging to the midpoint. Economic growth is
expected to recover during 2025 as lower interest rates stimulate investment
and spending.”
However, the MPC also warned that external risks from
geopolitical tensions and political uncertainty could increase economic and
inflation volatility in the medium term.
In response to the OCR cut, retail banks, including the
Co-operative Bank, Kiwibank, ANZ, BNZ, Westpac, TSB, and ASB, swiftly reduced
floating mortgage rates, business loan rates, and savings rates, passing on the
full extent of the reduction.
“Enquiry has definitely picked up over the past few months,”
says Lance Judson, Property Brokers’ Commercial General Manager. “We’re seeing
investors and developers of all sizes re-entering the market and getting their
projects moving again. With banks easing their lending criteria, confidence is
returning, as reflected in the number of offers we’re receiving on properties
for sale.”
“The Industrial sector has definitely held up the best over
the past few years”, Judson says “with substantial growth in this sector
predicted. Rents are still relatively strong as supply continues to be
constrained by land availability. The emergence of Business and Industrial
Parks in towns such as Waharoa. Rolleston and Timaru has seen major economic
boosts for regions not traditionally known for their Commercial might.”
While bullish about the industrial sector, Judson sounds
some concern over the office and retail sectors. “We have definitely seen a
flight to quality in the office sector with tenants now more discerning about
where they go and having greater choice than they have in the past. A rise in
vacancies in lower quality office buildings, coupled with weak rental growth is
forcing landlords to upgrade their buildings in order to secure a tenant. Soft
consumer spending and the growth of online shopping are definitely creating
challenging market conditions in the retail sector as we see more and more
established businesses hit the wall.”
Judson expects to see keen competition for
development land over the next 18 months as developers scramble to gear up for
the next cycle upswing. “Whenever you get a lull in a cycle, it is followed by
a period of catch up. We are just entering this phase now. The problem is
however, can supply of materials match demand, and is the skilled labour force
still there are ready to up tools again”.
