If that pans out, it’ll be a “W-shaped” recovery.

House prices plummeted from November 2021 to May 2023.

They went up a bit until 2024, then sagged again.

In fact, today's house prices are almost exactly where they were at the previous ‘bottom of the market’ in 2023.

House price recovery to come in 2027, according to Reserve Bank forecast

The Reserve Bank is forecasting house prices to rise by 9.2% in the two years from Q1 2027 to Q1 2029.

If they’re right, we could be finally getting to the end of this property market downturn.

Of course, forecasts can be wrong. We've seen that before.

But if this one plays out, someone buying today could be investing very close to the bottom.

Just keep in mind that some areas of New Zealand have already fully recovered.

Canterbury house prices, for instance, are hitting record highs.

Auckland, on the other hand, is creating new ‘bottoms of the market’.

If you like investing in a rising market, Canterbury might be the right fit for you.

If you prefer investing in a market that's doing it tough and might have opportunities, Auckland could be a better fit.

Why did the OCR go up?

If you're thinking: “Hang on … if the economy feels like it’s struggling, why on earth are they putting the OCR up?”

Great question.

That’s where you need to know about the neutral interest rate.

That’s the point where the Reserve Bank is neither trying to slow down nor speed up the economy.

Right now, they estimate that the neutral OCR is around 3.1%.

So, although the OCR has gone up to 2.75%, we're still below that neutral level. And the Reserve Bank thinks they've still got their foot on the gas.

And the war in Iran and the resulting oil price shock are pushing inflation up. It’s now 4.1% and is too high. 

If they gradually increase the OCR, they see themselves as taking their foot off the accelerator. They’re not slamming on the brakes.

What does this mean for your mortgage?

The good news is that yesterday’s OCR increase doesn't automatically mean mortgage rates are about to skyrocket.

The market was already expecting the 0.25% increase.

ANZ's latest forecasts have the one-year mortgage rate sitting around 5–5.1% for the next year.

They also forecast that the two-year rate may fall from 5.5% to 5.2% over the next year.

What does this actually mean for your property?

Put a number on it.

Say you own an $800,000 property. If the Reserve Bank is right, it dips to about $796,000 at the bottom in 2027.

Then it climbs 9.2% over the next two years, to roughly $869,200.

So the dip costs you about $4,000 on paper. The recovery is worth about $69,200.

That's the Reserve Bank's forecast, not mine. They've been wrong before, and they'll be wrong again.

But that's the shape of what they're expecting. A dip, then a recovery.

Not another crash.