by Jenny Ruth
Even as interest rates continue rising, people’s expectations are that house prices will continue to rise, according to ASB Bank’s latest survey of housing confidence.
That’s even though another survey, AMP Banking’s, showed the biggest drop in home affordability in the June quarter since December 1994.
AMP’s home affordability index fell 14.9% in the June quarter following a 4.7% fall in the March quarter. The bank notes house prices have surged 10.6% in the past 12 months while floating mortgage rates rose from 6.7% to 7.75% in the June quarter.
The latter was the biggest reason for the decline in home affordability, it says.
Nevertheless, AMP’s head of specialist banking, Lynda Arkulisz says the home buying environment remains positive.
ASB Bank’s survey shows 54% of respondents expect house prices will increase, up from 40% in the March survey. That’s even though 71% believe interest rates will continue to rise over the coming quarter.
But the number of people who think it’s a good time to buy a house is declining. Only 35% thought so in the June quarter, down from 49% in the March quarter. The South Island remains more positive with 43% thinking it’s a good time to buy.
ASB chief economist Anthony Byett says a continued rise in personal incomes, ongoing high net migration flows and a continued under-supply of houses are contributing to expectations of rising house prices.
"While new building will add to supply in the coming months, a continued high net migration inflow will ensure demand also remains high," he says.
A surge in international house prices is also contributing to rising house prices in New Zealand. "New Zealand locations are comparatively cheap already and become even more favourable whe compared with the rising prices overseas," he says.
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