The Reserve Bank left the Official Cash Rate at 2.0%.

House Price inflation remains excessive, posing concerns for financial stability. There are indications that recent macro-prudential measures and tighter credit conditions in recent weeks are having a moderating effect.

Monetary policy will continue to be accommodative. Our current projections and assumptions indicate that further easing will be required to ensure that future inflation settles near the middle of the target range.

The Reserve Bank cut the OCR by 25 basis points to a new record low of 2.0% this morning.

It pointed to weak global conditions,ongoing low inflation and the high New Zealand dollar as the reasons for its move.

As such, the Reserve Bank said monetary policy will continue to be accommodative- and further cuts to the OCR are likely to come.

The National Business Review states Housing Minister Nick Smith has announced effective today Kiwisaver house price caps would increase by $50,000 across the country.

• They are now $600,000 in Auckland,
• $500,000 in Wellington, Christchurch, Hamilton, Tauranga, Queenstown and Nelson-Tasman.
• $400,000 in all other areas.
• In Addition for new build properties the caps increase another $50,000, i.e $650,000 for Auckland, $550,000 inWellington,Christchurch,Hamilton,Tauranga,Queenstown and Nelson-Tasman.
• $450,000 in all other areas.

In addition Income caps have raised to $85,000 for a single buyer or $130,000 for two or more buyers.

New Zealand’s economy is trucking along nicely – and yet inflation continues to evade the reserve Bank’s target level,according to several new reports.

Despite continued weakness in dairy prices, the tourism and construction sectors are boosting economic growth to the point that HSBC has raised their GDP growth forcast from 2.4% to 2.6% in 2016.

Despite this, the Reserve Bank still faces a challenge in getting inflation up to it’s near 2% target. The subdued inflation outlook indicates further scope to cut the OCR to 2%, largely due to the resilient strength in the NZ dollar.

The Reserve Bank governor Graeme Wheeler says the LVR( Loan to value Ratio) restrictions introduced by the bank have been “very successful”.

He says the restrictions have stopped about $20 Billion of highly leveraged lending since they were introduced.

Before they started around 21% of lending was  with an LVR of over 80%, now it is down to 13%.

Wheeler said further LVR changes for investors is one of the scenarios the Reserve Bank is currently looking at.

According to the bank property investors account for 46% of lending in Auckland and around 40% in the rest of the country.

New Reserve Bank Lending data shows total lending of $6,504 billion in April was slightly down on March’s $6,572 billion.

Of this $3,536 billion went to Auckland borrowers and $2,968 billion went to non-Auckland borrowers.

Investors accounted for $2,386 billion of April’s new lending.

First home buyers borrowed $789 million in April.

Property investors have become – by far – the biggest buyers in the Hamilton housing market.

And nearly one in three of those is coming from Auckland.

Figures from property analyst Core Logic show in the past year almost half of all those buying property in Hamilton are those who already own other properties.

First-home buyers and Auckland investors were neck and neck in buying houses in Hamilton in the third quarter of 2015.

First home buyers stood at 18.2 per cent, only just ahead of 17.4 per cent for Auckland investors. Add in the other investors on 30.5 per cent and you have a total investor market of 47.9 per cent.

Just seven months after new valuations were set for Hamilton homes,some are already fetching up to $205,000 above those figures.

Hamilton City council revealed an average increase of 21.4 per cent on Capital Valuations in November last year, compared with the last time they were set in 2012.

Real Estate Institute figures for March show the median house sale price in Hamilton rose to $472,000 from $350,000 year on year.

The consumer price index (CPI) rose 0.2% in the march quarter, after a fall of 0.5% in the December 2015 quarter.

Most inflation measures picked up, suggesting inflation may have bottomed out but it is still very weak, well below the bottom of the 1% to 3% target of the Reserve Bank.

That would normally prompt the bank to cut the cash rate to try and stimulate inflation. But on the other hand, real Estate Institute data shows house price inflation has picked up substantially after what seemed to be a slowdown earlier in the year.

Economists said an OCR cut was still likely but might be pushed further out by the news.

Ongoing lack of supply has started to push Auckland’s prices up again,Barfoot & Thompson says.

The average sales price rose by 5.4%, from $822,024 in February to $866,782 in March.

The number of houses sold in March was up 92.1% from 698 sales in February to 1341 sales in March.

The lack of supply continues to be the main driver- at the end of March listings were down 6.8% on February according to Peter Thompson.