Photo: RNZ / Marika Khabazi
Property investors will switch from being the "hunted" to the "hunters" as conditions improve for them, Kiwibank says.
Real Estate Institute data for July shows the number of houses being listed on the market continued to increase last month, but the number of properties sold also picked up.
Its data shows the number of sales lifted 14.5 percent on the same time a year earlier, to 5806, and increased by almost 20 percent on the month before.
"Although we have not yet reached the spring selling season, we are observing early signs of growth in the market not typically associated with this time of year. This can be seen through the seasonally adjusted data, which indicates an increase of 5.4 percent in national sales compared to last year, which reflects a market performing above anticipated levels," chief executive Jen Baird said.
The house price index was up 0.2 percent from a year earlier but down 0.3 percent from June.
The median days to sell a property increased.
Kiwibank chief economist Jarrod Kerr said things could change now that interest rate cuts were coming "thick and fast".
He said investors had been "hunted" by policymakers in recent times, both through government policy and rules set by the Reserve Bank.
The removal of interest deductibility, the extension of the bright-line test and tighter loan-to-value rules had all targeted investors, but had all since eased.
Kerr said the rule changes had been "precisely what we don't need with a chronic housing shortage. But now the hunted will become the hunters".
He said the Reserve Bank would take interest rates from "very restrictive" levels to much less restrictive, and potentially stimulatory.
Kerr said tailwinds were coming for the property market.
"Interest rates are the biggest driver of house prices ... as the debt-to-income ratios take effect we expect to see a further loosening in the LVRs. And investors no longer need to worry about the brightline test or interest deductibility, with the rise in rental yields, investors should return to the market."
He said investors would look for opportunities in a buyers' market.
"The true test will come in spring as the property ,market thaws out from a cold winter."
ASB economists said they did not expect a quick turnaround in the short term, despite the rate cut.
"There are still a number of headwinds facing the market."
They said they expected house price growth of just 1 percent this year before the pace picked up again next year.
ANZ said the Real Estate Institute's data indicated that prices might be softer than the 1 percent fall in prices that it had predicted, but the rate cut could change that.
Corelogic's head of research Nick Goodall said there was no doubt that prospects for investors were improving.
"But I think there are still constraints that will mean they don't flock back in huge numbers right away.
"Yields are still pretty low and the gap to interest rates still pretty wide so mortgage top-ups are still required. I think back to Kelvin's article a few months ago, where he illustrated the difference between yield and mortgage rates meant decent-sized mortgage top ups were required. While falling interest rates will improve that, it could still take a while before rents - which are now slowing - fully cover the mortgage."
He said expectations of long-term capital growth were reduced by the debt-to-income restrictions. The Reserve Bank expects house price growth to remain below 6 percent a year through to September 2027.
"While the DTIs are effectively non-binding while interest rates are high, as interest rates fall they will kick in, and in turn they'll limit how much demand can grow by, keeping competition in check and upward price pressure limited. All that being said, we do expect a sentiment boost off the back of the OCR cut ... just that it doesn't make the sums or profits stack up immediately so may take some time to flow through to real demand."
