Housing confidence lowest since 1996

by NZ Adviser09 Nov 2016
Buyer sentiment has fallen to a historical 20-year low, the latest ASB Housing Confidence survey shows.

According to net quarterly figures for New Zealand, 26% of people think now is not the time to buy a house, compared to 20% three months earlier.

ASB chief economist Nick Tuffley says factors contributing to the subdued buyer sentiment were the continued expectations of house prices going up; higher debt servicing costs; and the impact of the latest loan-to-value ratio (LVR) restrictions. 

“The fact that the 40 per cent investor deposit requirement is having a proportionately larger impact on investors outside of Auckland could explain why sentiment dropped more in other regions this quarter,” Tuffley says.

On the other hand, if the new restrictions slow market activity and house price growth over time, potential first home buyers might begin to look more favourably on the housing market.

“However, first home buyers may remain cautious given recent house price appreciation, and they are also likely to be wary of perceived changes in borrowing costs. All up, high house prices and a higher deposit threshold for investors are likely to weigh on sentiment this year.”

The survey showed the majority (58%) of respondents still expected house prices to rise and also not as many expect interest rates to go lower, but rather stay steady or go up. 

“This is likely to be because the previous two OCR cuts were associated with little downward movement in mortgage rates,” Tuffley says.

“We continue to expect the RBNZ to cut the OCR by 25bp on Thursday (November 10), but due to funding issues, we don’t expect floating mortgage rates to move to the same extent. Term mortgage rates have started to creep up.”
 

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