Offshore interest rate increases could see mortgage rates creep up, ASB claims
Most respondents to ASB’s Housing Confidence Survey expect interest rates will begin to rise over the next 12 months.
ASB chief economist Nick Tuffley said muted inflation pressures have pushed ASB’s forecast for Reserve Bank rate hikes.
“We now expect RBNZ to start lifting the Official Cash Rate in August 2019, though in the meantime offshore interest rate increases could see mortgage rates start to creep up.”
The survey also showed house price expectations sit at six-and-a-half year low. While, the number of people who think now is a bad time to buy a house has reduced, particularly in Auckland.
Tuffley said the change in attitude is most likely due to Auckland’s softening house prices, where sentiment about whether it’s a good time to buy a house is at the highest level since January 2013.
“Price expectations have fallen to an eight-year low in Auckland as we continue to see the Reserve Bank of New Zealand’s (RBNZ) speed limits taking effect,” Tuffley said.
While national house price expectations are trending downwards, the latest survey reveals a difference in sentiment between North Island and South Island respondents.
Price expectations in the South Island have lifted, led by Canterbury (net 11% from 8% previously). On the other hand, price expectations continued to ease in the North Island.
Annual price growth rates have slowed sharply in North Island centres such as Auckland, Tauranga and Hamilton. In contrast, price growth rates remain around 10% per annum in the South Island beyond Canterbury.
At the same time, fewer respondents now view it as a bad time to buy with sentiment lifting most notably in Auckland. Canterbury remains the only region where the majority of respondents think it’s a good time to buy.
Tuffley says despite the lift in overall sentiment to buying property, upcoming housing policy changes may further ease house price expectations.
“There is a degree of uncertainty around the potential impact of policy changes so investors and home owners are likely to remain cautious and not rush into any major decisions.
“The market will continue to be constrained by population growth and low housing supply for some time,” Tuffley added.
Related stories:
OCR unchanged at 1.75%, RBNZ
Inflation expected to slow to 1%
