House price sentiment falls across New Zealand

by NZ Adviser15 May 2017
Pessimism is deepening across the regions when it comes to buying a house, except in Auckland, according to ASB’s latest Housing Confidence Survey.

Although a regional breakdown revealed that a negative outlook increased in the regions in the three months to April, it eased in Auckland, where a net 19% believed it’s a bad time to buy a house, compared to 27% last year.

ASB chief economist Nick Tuffley says historically-high house prices, higher deposit requirements and expectations for further interest rate increases are likely to be weighing on sentiment generally.

“The fact that the number of homes available for sale in the Auckland property market has lifted recently might explain its reduced degree of pessimism this quarter,” Tuffley said.

“The overall drop in respondents expecting house price gains likely reflects the recent tightening of lending standards, which has slowed housing market activity in many regions.

“In Christchurch, higher levels of residential construction have more than made up for the housing shortage caused by the earthquakes and as a result, Christchurch house price growth has been tepid recently.”

The survey also found that for the first time since October 2014, more than half of respondents expect interest rates to rise (51%), a 37% increase from last quarter.

“As we saw in last quarter’s results, mortgage and term deposit rates have lifted off their lows recently,” Tuffley said. 

“In the US, the election of Donald Trump and recent rate hikes by the US Federal Reserve have seen US interest rates lift, which has lifted New Zealand’s longer term interest rates. 

“We expect the RBNZ to leave the OCR on hold until late 2018, which should provide an anchor to short-term rates. However, funding issues and offshore rate increases have seen interest rates creep higher over the past six months.”

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