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NZ PROPERTY PRICES SET TO INCREASE FURTHER WITH DROP IN THE OFFICIAL CASH RATE

Thursday July 23rd, 2015

The Reserve Bank's decision to cut its key interest rate again will push up property prices, the real estate institute says.

A softening economic outlook and low inflation prompted the central bank to lower the official cash rate to 3.0 per cent on Thursday morning, which has already seen floating mortgage rates fall.

Reserve Bank Governor Graeme Wheeler said more cuts were on the cards after the 25-basis point move, and a weaker dollar was needed.

Real Estate Institute of New Zealand chief executive Colleen Milne said the interest rate cut would lead to higher property prices.

The most important consideration for property markets was in terms of interest rates and the extent of further reductions during the next few months.

"In the short term lower interest rates would tend to put upward pressure on prices – particularly in Auckland, and perhaps also in regions where recent feedback suggests there has been some involvement from Auckland-based investors," Milne said.

Wheeler said house prices in Auckland continued to increase rapidly, but otherwise house price inflation generally remained low. Although increased building work was underway in Auckland, it would take some time for the imbalances in the market to corrected, he said.

Source: Stuff.co.nz


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