PHOTO: ASB Housing Confidence survey
- Only a net 11% of Kiwis expect house prices to continue increasing, down from a net 49% last quarter.
- A net 81% of survey respondents expect interest rates to increase over the coming year – a 26-year high.
- Meanwhile, a net 20% of respondents say it’s a bad time to buy a house.
- Higher mortgage rates, tighter credit conditions and increased supply are impacting the housing market, and this is expected to continue.
New Zealanders’ house price expectations plummeted in the first quarter of 2022, with the latest ASB Housing Confidence survey showing a net 11% of respondents think house prices will continue to rise over the coming year, down from a net 49% last quarter. Buyer sentiment meanwhile edged up slightly, but remains very low with a net 20% of respondents saying it was a bad time to buy. This compares to a net 28% saying it was a bad time to buy last quarter.
ASB senior economist Mike Jones says the survey results, which cover the three months to April, are expected given recent changes in the housing market, and pricing sentiment could continue to fall given stiffening house price headwinds.
“We were concerned about house price overconfidence last year, but the abrupt turning of the housing cycle has put paid to all of that. If anything, we’re surprised sentiment hasn’t dropped further. House prices have already fallen around 5% from their November peaks and we think the slow leak of pressure out of the housing market has at least another 12 months to run.”
Regionally, South Islanders (outside of Canterbury) were the most pessimistic about the housing market, with a net 7% expecting prices to continue rising. Cantabrians were more positive, experiencing the smallest fall in housing confidence. Although house price growth in Canterbury was very strong during the upswing, affordability measures are actually relatively less stretched there and prices should see smaller drops there during the downcycle, according to ASB forecasts.
“Higher mortgage rates, tighter credit conditions and increased supply are all having an impact on the market now, and we don’t see this changing anytime soon. In our view, it was the credit tightening that tipped the housing market scales, and things may soon ease up a little on this front. However, the bulk of the house price impact from mortgage rate increases is yet to come, with around 60% of all mortgages rates resetting over the coming 12 months.”
Mr Jones says the silver lining is a small lift in buyer sentiment, indicating housing perceptions may be starting to change.
“Higher supply and cooling demand have tipped the market balance back towards buyers. Respondents still overwhelmingly believe it’s a bad time to buy a house, but this has improved since last quarter. We think these are first signs of improving affordability coming through.”
“Sure, it’s a drop in the ocean. But if our views are roughly correct, affordability should keep improving for at least the next 12 months as house prices pull back and wage growth accelerates.”
The latest ASB survey shows a net 81% of respondents expect interest rates to keep rising over the
coming 12 months – a 26-year high, and an increase from a net 77% last quarter.
The full ASB Housing Confidence Survey for the three months to October 2021 will be available online at www.asb.co.nz Other recent ASB reports that also include housing commentary can be accessed via a Search page https://reports.asb.co.nz by selecting the keyword ‘Housing’.