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House price rises coming

Monday, April 8th 2002, 7:45AM

People expect house prices to rise and, in general, that expectation is realistic, according to ASB Bank chief economist Anthony Byett.

"There will undoubtedly be areas where price rises will not occur, but the big picture is one of rising demand and limited supply," Byett says.

"This is showing as lower listings amongst real estate agents and will persist until higher interest rates quell the demand pressure and new homes are eventually built."

He expects house prices will rise between 5% and 10% throughout New Zealand over the next year or so.

Whereas low interest rates and a perception that house prices were reasonable were the factors boosting housing confidence last year, now it’s the expectation of rising house prices which is fuelling confidence, Byett says. That’s even though people also expect interest rates will rise.

Byett says rising interest rates may take some of the heat out of the housing market in the second half of this year but are unlikely to cause a downturn.

ASB Bank’s latest survey found a net 49% of respondents think it’s a good time to buy a house – 54% think it is a good time while only 5% think it’s a bad time to buy. A net 42% expected higher interest rates, even before Reserve Bank governor Don Brash hiked his official cash rate from 4.75% to 5% on 20 March.

The expectation of rising house prices is highest in Wellington where a net 58% are optimistic. Whether or not that expectation is realistic remains to be seen. Byett notes that over the last five years Wellington house prices have risen an average of 6% a year while house prices in the rest of New Zealand have risen only 1% a year.

Nevertheless, housing confidence is relatively depressed in Wellington with only 42% saying it’s a good time to buy.

In the key Auckland market, where house prices have been depressed for the past five years, a net 52% are expecting price increases. The national average is a net 41% expecting house prices to rise.

While inflation, which tends to lead to higher house prices, has been a little higher recently and is expected to remain so for some time, Byett sees what is happening now as more of a catch up to incomes.

While house prices have been rising only 1% a year across the country, incomes have been rising 2% to 3% a year.

But Byett doesn’t expect the same boom in house prices the country experienced in the early to mid 1990s, which followed a prolonged crash and caused the Reserve Bank to keep interest rates relatively high.

If the current round of house price increases remains under 10%, the central bank isn’t likely to get too concerned about it, he says.

« Banks keep the lid on their smaller competitorsNZ housing boom pales by global comparisons »

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Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA 4.55 2.55 2.69 2.79
ANZ 4.44 3.15 3.25 3.39
ANZ Special - 2.55 2.69 2.79
ASB Bank 4.45 2.55 2.69 2.79
Bluestone 3.49 3.49 3.49 3.49
BNZ - Classic - 2.55 2.69 2.79
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 3.15 3.29 3.39
BNZ - TotalMoney 4.55 - - -
CFML Loans 5.50 - - -
Lender Flt 1yr 2yr 3yr
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 3.35 3.85 -
Heartland 3.95 2.89 2.97 3.39
Heartland Bank - Online - - - -
Heretaunga Building Society 4.99 ▼3.85 ▼3.95 -
HSBC Premier 4.49 2.45 2.60 2.65
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 3.69 2.55 2.65 2.79
Kainga Ora 4.43 ▼2.93 ▼3.07 ▼3.24
Kiwibank 3.40 3.30 3.54 3.54
Kiwibank - Offset 3.40 - - -
Kiwibank Special 3.40 2.55 2.79 2.79
Liberty 5.69 - - -
Nelson Building Society 4.95 3.45 3.49 -
Pepper Essential 4.79 - - -
Resimac 3.39 3.45 2.99 3.35
SBS Bank 4.54 ▼3.05 3.19 ▼3.25
Lender Flt 1yr 2yr 3yr
SBS Bank Special - ▼2.55 2.69 ▼2.75
The Co-operative Bank - Owner Occ 4.40 2.55 2.69 ▼2.79
The Co-operative Bank - Standard 4.40 3.05 3.19 ▼3.29
TSB Bank 5.34 3.35 3.49 3.79
TSB Special 4.54 2.55 2.69 2.99
Wairarapa Building Society 4.99 3.65 3.69 -
Westpac 4.59 4.15 4.09 4.49
Westpac - Offset 4.59 - - -
Westpac Special - 2.55 2.69 2.79
Median 4.55 3.05 3.13 3.12

Last updated: 11 August 2020 8:24am

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