House price expectations at five-and-a-half-year low

A major bank says a greater confidence drop is expected for the next quarter

House price expectations at five-and-a-half-year low
Expectations for house price gains are at a five-and-a-half-year low, according to the latest housing confidence survey from ASB.

The results found that only a net 15% of respondents expect house prices to lift, for the three months ended in July - the lowest price expectations among Aucklanders in eight years.

Nationally, fewer Kiwis or 32% of the respondents expect house price gains over the next 12 months, compared to the 42% last quarter.

ASB chief economist Nick Tuffley said there is no doubt the dip in confidence reflected the fact that house sales volumes are among the lowest levels since 2014.

“The subdued sales activity has coincided with the market hitting the brakes on house price growth, with prices falling slightly in Auckland and Christchurch. In the case of Auckland, this is the first time house prices have fallen since 2010,” Tuffley said.

“It makes sense that when people are hearing the market is softening they adjust their expectation accordingly.”

The slowdown was due to interest hikes as well as the Reserve Bank’s macro prudential measures introduced last year, Tuffley said. “The 40% investor threshold is making it much harder for some people to buy.”

“Given that market conditions are likely to remain soft over the next few quarters, we anticipate greater drop in house price expectations in next quarter’s survey.”

According to the results, 13% of the respondents said now is a bad time to buy a house.

Ultimately, the majority of respondents see higher interest rates ahead. Although net interest rate expectations moderated slightly over the last quarter (to 47% from 51%), they remain near recent highs.

“On balance, respondents are likely to continue expecting interest rates to be relatively flat over the next few years as we gradually leave this period of historically-low interest rates behind us,” Tuffley said.


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