Auckland housing measures weigh on price expectations

Wednesday, 27 January 2016, 12:18 pm
Press Release: ASB Bank

Embargoed Media Release
ASB Housing Confidence Survey
EMBARGOED until 0500 Wednesday, January 27, 2016

Auckland housing measures weigh on price expectations

• House price expectations continue to cool.

• Falls in interest rate expectations have eased; many see no change in interest rates ahead.

• House buying sentiment remains low but shows signs of improving.

The number of people expecting price gains in the property market has fallen further at the start of 2016, as measured by ASB’s quarterly survey of housing market sentiment.

The RBNZ’s new housing measures aimed at regulating Auckland investor activity have taken some of the heat out of the market, reflected in the latest survey results.

A net 44% of survey respondents now expect house prices will increase over the next 12 months, down from the net 52% who expected price gains last quarter, and well down from the record high of 69% in the three months to July.

Unsurprisingly, the fall in net house price expectations is most pronounced in Auckland, where net price gain expectations fell to 30% from 50% last quarter.

ASB Chief Economist Nick Tuffley says that the decline in net price expectations in the rest of the country was a little more surprising.

“Recent trends have indicated that the Reserve Bank’s new lending measures have bought an accelerated house price growth outside of Auckland, something we had expected to see,” Mr Tuffley says. “Yet this survey doesn’t show any strengthening of price expectations beyond Auckland.”

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In Canterbury the continual moderation in net expectations of price gains since early 2013 (when net expectations peaked at 79%) is consistent with the region’s market moving to a more balanced position.

Interest rate outlook

Expectations for interest rates to fall have also eased, and there was a noticeable increase in respondents expecting interest rates to stay where they are.

“ASB’s Housing Confidence Survey shows more respondents are expecting interest rates to stay the same, perhaps because they don’t think they can drop much lower,” Mr Tuffley says

“We expect the Reserve Bank to cut the OCR by an additional 50bp over 2016. We may see more people expecting low interest rates as we get further into 2016,” Mr Tuffley says.

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

While improving slightly, sentiment remains low nationally, with a net 5% of respondents seeing now as a bad time to buy a house. Auckland (at 22%) and Canterbury (4%) continue to be the two most pessimistic regions.

“Sentiment has become a little less pessimistic in the latest survey,” Mr Tuffley says.

“This quarter, a net 22% of Auckland respondents regard now as a bad time to buy a house, down slightly from 25% last quarter. High house prices and the tight housing market will continue to weigh on sentiment, as may the additional tax and lending rules.”

Regionally, in the South Island outside of Canterbury, respondents were the least pessimistic, with a net 11% viewing now as a good time to buy (4% last quarter). Low interest rates are also likely to be boosting sentiment in these regions.

Note: The ASB Housing Confidence Survey is constructed from data received from 2297individual respondents.

The full housing confidence report for the three months to January 2016 is attached and will be available online at www.asb.co.nz tomorrow [27/1].
ASB_Housing_Confidence_Report_January_2016.pdf

ENDS

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