OCR cut to 3.75%
What It May Mean for Commercial Property
What It May Mean for the Housing Market
On February 19, 2025, the Reserve Bank of New Zealand (RBNZ) lowered the Official Cash Rate (OCR) to 3.75% as inflation continues to ease. This marks another step in the central bank’s efforts to support economic stability and growth.
Key Impacts on Commercial Property
Lower Borrowing Costs
With interest rates set to decrease, businesses and investors may find financing more accessible, potentially driving increased activity in property acquisitions and development.
Market Confidence Boost
A lower OCR often signals a more favourable environment for investment, which may encourage renewed confidence in the commercial property sector.
Potential Value Adjustments
As capitalisation rates adjust, commercial property values could stabilise or shift depending on investor sentiment and lending conditions.
Sector-Specific Effects
Retail: Potential uplift as consumer confidence strengthens.
Industrial: Continued demand, particularly in logistics and warehousing.
Office: Improved leasing conditions as businesses look to expand.
Looking Ahead
The OCR cut is expected to have a broad impact across the commercial property landscape. According to the February Monetary Policy Statement, the RBNZ now expects the OCR to be around 3.00% by the end of 2025, which is 50 basis points lower than its previous forecast in late 2024. However, market conditions will continue to be influenced by external economic factors. If you’re considering a property investment, we recommend seeking advice from your financial advisor or broker.
On February 19, 2025, the Reserve Bank of New Zealand (RBNZ) reduced the Official Cash Rate (OCR) to 3.75% as inflation continues to decline. This could lead to more affordable borrowing, increased buyer confidence, and renewed momentum in the housing market.
Key Impacts on the Housing Market
Lower Mortgage Rates
If banks pass on rate cuts, mortgage costs may become more manageable for homeowners and buyers. Lenders could adjust rates in response, improving affordability.
Increased Buyer Demand
A lower OCR often stimulates market activity, which may encourage first-home buyers, investors, and upgraders to explore their options.
Potential Price Stabilisation
If demand increases, house prices in some areas may stabilise after recent declines, although this will depend on local supply and lending conditions.
More Opportunities for Sellers
If buyer confidence improves, sellers could benefit from increased market activity. Well-presented, well-priced properties may attract more interest.
Market Outlook
The February Monetary Policy Statement now forecasts the OCR to be around 3.00% by late 2025—50 basis points lower than previously expected. If rates continue to trend down, affordability could improve further, making 2025 a year of opportunity for buyers and sellers alike. If you're thinking about buying or selling, we recommend speaking with your mortgage broker or financial advisor to understand how these changes may affect your situation.