House price expectations highest since survey began in 1996

Friday, 31 July 2015, 5:32 pm
Press Release: ASB Bank

Media Release
ASB Housing Confidence Survey
EMBARGOED until 0500 Friday, July 31, 2015

House price expectations highest since survey began in 1996

• House price expectations hit a new record, with a net 65% of respondents expecting house prices to increase.

• More people expect interest rate declines over the next year.

• First signs that new rules for property investors are impacting price expectations and sentiment.

House price expectations have reached their highest level yet, as measured by ASB’s quarterly survey of housing market sentiment.

A net 65% of respondents expect house prices will increase over the next 12 months, up from 56% in the previous quarter and the highest reading on record since the survey began in 1996.

ASB Chief Economist Nick Tuffley says low interest rates will continue to boost the wider housing market

“The recent OCR cuts have put downward pressure on floating and short-term fixed mortgages. At the same time, longer-term mortgage rates have been held down, and at times even dipped as global interest rates declined,” Mr Tuffley says.

“Respondents have taken note of the changing tide of expectation for interest rates,” he says.

Expectations of house price gains over the year ahead have lifted sharply in both the North Island (excluding Auckland) and the South Island (excluding-Canterbury).

“Stronger sentiment outside of Auckland is likely to be reflecting the easing of lending restrictions for the rest of New Zealand, as well as falling interest rates,” Mr Tuffley says. “Consistent with these price expectations, recent housing data points to a broadening beyond the recent Auckland-centric theme.”

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Is it a good or bad time to buy a house?

Nationally, a net 11% of respondents believe now is a bad time to buy.

Sentiment remains marginally positive in the North Island, outside of Auckland, but dropped off at the end of the quarter within Auckland.

“Respondents in Auckland are likely pre-empting the added difficulty in buying houses ahead of tighter rules for overseas buyers and the RBNZ’s new LVR restrictions,” Mr Tuffley says.

“The RBNZ’s investor measures specifically target Auckland and expectations of higher prices in Auckland did ease off towards the end of the quarter. We may be seeing the first signs of respondents taking into account the likely price impacts of the new investor lending restrictions scheduled to come into effect on October 1.”

Interest rate outlook

Just over a year ago 70% of respondents were expecting higher interest rates over the year ahead.

But the outlook for interest rates has changed considerably over the past year. The ASB Housing Confidence Survey now reveals a net 3% of respondents expect lower interest rates over the year ahead.

“Given we expect the RBNZ to cut the OCR by an additional 50 basis points by October, we may see even more people expecting lower interest rates in next quarter’s survey,” Mr Tuffley says.

Results at a glance

• A net 65% of respondents expect house prices to increase over the next twelve months;

• A net 3% of respondents expect interest rates to fall over the next twelve months;

• A net 11% of respondents believe now is a bad time to buy.

Note: The ASB Housing Confidence Survey is constructed from data received from 2788 individual respondents.

The full housing confidence report for the three months to July 2015 is attached and will be available online at www.asb.co.nz tomorrow.

ENDS

ASB Bank

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