House Price Expectations Hit Six-Year Low

Thursday, 9 November 2017, 8:37 am
Press Release: ASB Bank

House Price Expectations Hit Six-Year Low

• House price expectations fall for the 5th consecutive quarter

• General election slows an already soft housing market

• Most people expect higher interest rates ahead

House price expectations have fallen for the fifth straight quarter to a six-year low, the ASB Housing Confidence Survey reveals.

A net 17% of respondents (for the three months to October) expect higher house prices over the next year, compared to 32% last quarter.

Price expectations remain lowest in Auckland, where they are at an eight-year low.

ASB chief economist Nick Tuffley says the General Election has further slowed an already soft housing market.

“First, loan-to-value ratio restrictions and slightly higher mortgage rates were causing most of the softness. But in recent months, uncertainty around the election has seen the market slow even further,” Tuffley says.

While Auckland house price expectations are the lowest (9%), falls in house price expectations were more pronounced in other regions. For example, expectations in the North Island excluding Auckland fell from a net 43% to a net 23%.

“We expect house price expectations to remain muted, as respondents are likely to continue anticipating soft market conditions,” Tuffley says.

Pessimism over whether it’s a good or bad time to buy still reigns

When it comes to house-buying sentiment, Christchurch bucks the national trend, where more people (a net 1%) think it’s a good, rather than bad, time to buy in that city.

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The combination of plenty of housing supply and falling house prices, from already affordable levels, appears to be boosting sentiment in the Christchurch market, Tuffley says.

Outside Christchurch, most respondents still see it as a bad time to buy a house. Sentiment is at net -11%, though not quite as negative as in the preceding quarter (-13%).

“With a number of uncertainties around future housing policy, respondents appear to be remaining cautious.”

Interest rate outlook

Most people are still expecting higher interest rates over the next 12 months, but expectations have eased from the highs earlier this year.

“This is likely to represent the fact mortgage rates have settled (if not fallen slightly) since the last ASB Housing Confidence Survey,” Tuffley says.

“While we expect the RBNZ to leave the OCR on hold until early 2019, offshore interest rates could see New Zealand mortgage rates creep higher in the meantime.”

ENDS

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