Kiwis’ house price expectations plummeting

Tāmaki Makaurau - Only 11 percent of Kiwis expect house prices to continue increasing, down from a net 49 percent last quarter, according to the latest ASB housing confidence survey.

A net 81 percent of survey respondents expect interest rates to increase over the coming year, which is a 26 year high.

Meanwhile, 20 percent 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.

Buyer sentiment has edged up slightly but remains very low with a net 20 percent of respondents saying it was a bad time to buy. This compares to a net 28 percent saying it was a bad time to buy last quarter.

The survey results, which cover the first three months to the year, are expected given recent changes in the housing market, and pricing sentiment could continue to fall given stiffening house price headwinds.

South Islanders outside of Canterbury were the most pessimistic about the housing market, with a net seven percent 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. The credit tightening has 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 percent of all mortgages rates resetting over the coming 12 months.

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. They are first signs of improving affordability coming through.”

The latest ASB survey shows a net 81 percent of respondents expect interest rates to keep rising over the coming 12 months.