More households expect rise in house prices

Economists are also tweaking their house price expectations

More households expect rise in house prices

More and more households are expecting rise in house prices following the drop in mortgage rates, according to the Reserve Bank of New Zealand (RBNZ)’s latest survey.

The central bank’s latest household inflation expectation survey has found a rise in the expectation of house price gains, with the respondents predicting 4% house price inflation over the next year compared to only 2.8% prediction last month.

Moreover, the number of respondents expecting rise in house prices has jumped from below 50% to 64.7% – the highest proportion expecting house price rises since the June 2016 survey.

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Economists are also tweaking their house price expectations – with Westpac economists insisting that their forecast of 7% house price inflation “is well in train to come good, potentially earlier than we thought.”

Meanwhile, ANZ economists predicted 5.5% house price inflation next year – with ANZ chief economist Sharon Zollner and senior economist Miles Workman pointing out that the housing market is tightening up on the back of lower mortgage rates.

"House price inflation has accelerated, up 3.3% y/y at the national level in October. And while regional divergence remains a key theme, most regions are displaying evidence of some tightening. House sales (up 8.2% m/m) are now picking up after a prolonged period of softness, and nationwide days to sell have dropped further below their historical average (to 37),” they wrote on ANZ’s “New Zealand Property Focus” report.

“We expect the recent decline in mortgage rates will continue to provide impetus to the housing market, with annual house price inflation peaking at 5.5% in 2020 – a small upgrade since the October Property Focus.”

“That said, policy, credit, and affordability headwinds are still expected to prevent the housing market from shooting to the moon once again, but that possibility can’t be completely ruled out,” Zollner and Workman concluded.

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