New Zealand OCR Cut: What It Means for the Short-Term Rental Market
By: Scott Mears - Aspire PRO Enterprises
On 19th February 2025, the Reserve Bank of New Zealand (RBNZ) announced a 50 basis point reduction in the Official Cash Rate (OCR), lowering it to 3.75%. This marks the third consecutive significant cut, aimed at stimulating an economy that has been experiencing sluggish growth while ensuring inflation remains within the target range.
The RBNZ’s Monetary Policy Committee highlighted that while domestic inflationary pressures are easing due to spare capacity in the economy, global uncertainties—such as geopolitical tensions and shifting trade policies—continue to pose risks. Despite these challenges, the central bank expects economic growth to recover throughout 2025, with lower interest rates encouraging both consumer spending and business investment.
RBNZ Governor Adrian Orr and Deputy Governor Karen Silk (Source: NZ Herald).
Implications for the Short-Term Rental Market
The latest OCR reduction is expected to have several effects on New Zealand’s short-term rental (STR) sector:
1. Lower Mortgage Costs
With the OCR cut, banks have already begun reducing their floating mortgage rates, with further declines in fixed-term rates anticipated. This means property owners with mortgages will see lower repayments, reducing financial pressure. Additionally, the cheaper cost of borrowing may encourage new investment in short-term rental properties, particularly in high-demand locations like Hamilton.
2. Increased Tourism and Rental Demand
Lower interest rates are expected to boost overall economic activity, leading to increased consumer spending. This, combined with the government’s continued push to revitalise the tourism sector, could result in higher demand for short-term accommodation. Popular destinations are likely to see improved occupancy rates and stronger rental yields, making STR investments more attractive.
3. Property Price Stabilisation
New Zealand’s property market has been experiencing an oversupply of listings, creating a buyer’s market. While the OCR cut may help stabilise house prices, a sharp increase in values is unlikely in the short term due to the existing high inventory and cautious sentiment among buyers - experts are still predicting a 5% rise in the property market for 2025. However, for investors looking to begin or expand their STR portfolios, this presents an opportunity to acquire properties at competitive prices.
Final Thoughts
The RBNZ’s decision to lower the OCR creates a more favourable environment for short-term rental investors, reducing financing costs while potentially driving higher demand through increased tourism.
For STR operators and property investors, the coming months present both opportunities and challenges. While cheaper borrowing and improved occupancy rates could drive growth, it remains essential to stay informed about market trends and evolving economic conditions to make well-informed investment decisions.
With inflation now under control and the RBNZ dropping the Official Cash Rate (OCR) to 3.75%, banks have already dropped their mortgage rates and with more OCR cuts on the horizon, more signs of recovery should start to show soon. Property values are still expected to rise by 5% in 2025, and now could be the best time to secure an under-market deal before prices climb.
Thinking about buying an investment property in Hamilton at this OCR level or expanding your current portfolio? Why not explore the short-term rental market with your property managed by Aspire PRO Enterprises - go here to get a free appraisal on your property or contact us for a confidential discussion.