File pic Photo: 123RF
The Reserve Bank's decision to cut the official cash rate by 50 basis points, to 4.75 percent, will help the property market, but house prices may still only increase slowly from here.
Chief economist at property data firm CoreLogic, Kelvin Davidson, said the key point for the housing market was the home loan interest rates were likely to continue to drop.
"This could easily produce a short-term lift in confidence and a more active housing market as we hit the normal spring uplift anyway."
But he said while house prices might stop falling in the near future, there were reasons why an upward surge was not likely.
Housing affordability was still stretched and there were a lot of listings to choose from, he said.
"But perhaps the most important restraint right now is the labour market. Job losses themselves will tend to limit house sales and prices. But there's also the knock-on effect on sentiment even for those people who keep their jobs but don't feel as secure in their role as they did before. In addition, flatter wages will also tend to subdue the housing market."
NZ Property Investors Federation spokesperson Matt Ball said the rate cut should mean better times ahead for property investors and renters.
"To be clear, a lower cash rate today doesn't mean rent cuts tomorrow - that's not how things work. Many of our members are on fixed rate mortgages so it will take time for the OCR cut to filter through.
"However, lower interest rates and the changes the government is making to the rental sector will make it more attractive for people to invest in it. This will increase the supply of rental property, and increased supply will give renters more choice at a better price."
He said there were signs of investors getting ready to return to the market.
"Interest rates are falling, banks are keener to lend, interest deductibility is returning, and positive changes are being made to the Residential Tenancies Act, so there's a better environment for people wanting to get into the business of providing rental accommodation.
"There are still bargains to be had in the property market, particularly for investors ready to put in the hard work and add value to their investment by renovating the properties they buy.
"On the downside, other costs like rates, insurance and maintenance are still high, it's a tenant's market and rents are static, so anyone getting into the business must ensure the numbers add up.
"We get the feeling that cashed-up investors will be first off the block, while newer investors, who are more reliant on borrowing, may wait for interest rates to fall further."
Real Estate Institute chief executive Jen Baird said real estate salespeople across the country were seeing increasing activity, particularly at open homes.
She said the OCR cut would reinforce optimism in market sentiment.
Davidson said falling interest rates would made debt-to-income restrictions more important.
"Another reason to be cautious about the speed and duration of the next housing cycle. Indeed, the DTIs are effectively an 'insurance policy' for the Reserve Bank in this cycle. Previously, they might have been wary of cutting too soon, at the risk of driving house prices up. But now DTIs will act to curb that growth."
