Inflation is back in the headlines, but don’t let the noise fool you. The September quarter print came in at 3.0% which is technically the top of the Reserve Bank’s band but hardly a new crisis. As Kiwibank economists put it, this is “up, up, but not away”, a temporary blip rather than a lasting wave. For residential investors, the story is not the headline inflation rate but the shifting balance between financing costs, rental demand, and operating expenses.
What’s really driving the numbers
- Council rates and electricity were the big offenders, both posting eye-watering annual rises. Power costs in particular are at their sharpest increase since the 1980s.
- Rents and construction costs usually the bread and butter for housing investors are softening. Rental growth has flattened across most of the country, and Stats NZ shows construction cost inflation is at its weakest pace since 2009.
- Imported (tradable) inflation ticked up on food, but strip that out and the pulse is already easing. Non-tradables are drifting lower once you exclude one-off administered charges.
So the real villain in your portfolio right now is not inflation itself. It is the operating costs chewing away at net yield.
Signals investors can trade around
Kiwibank’s central take is that the policy path is still lower. They have signalled an OCR track that could see the cash rate at 2.25% by November with a glide toward 2% inflation by 2026. Translation: the direction of travel for mortgage rates is down. Slowly, unevenly, but down.
- Refinancing relief is coming. Wholesale curves are drifting lower, and the 1–2 year part of the fixed curve now makes sense for most rollover strategies.
- Expense lines need a fight plan. With council rates and electricity surging, cashflow management is now as important as...
