Bollard guarded on property slowdown

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In a classic “on the one hand/on the other” approach, the Reserve Bank’s monetary policy statement is projecting “a sharp decline in house price inflation over the coming years,” although the central bank says there are “considerable uncertainties around this projection.”

He pointed to low rental yields which is likely to make property investment much less attractive as the large capital gains of recent years starts to slow.

“However, the projected downturn in residential investment is reasonably muted by historical standards. Unlike previous cycles, net immigration is expected to remain positive, underpinning residential investment activity to some extent.”