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Higher prices predicted

Expectations are high that low interest rates will fuel house price rises over the coming year, ASB’s latest Housing Confidence Survey shows.

Tuesday, February 17th 2015, 12:00AM

by The Landlord

A net 59% of respondents expect higher prices over the year ahead - the strongest sentiment since early 2013, said ASB Chief Economist Nick Tuffley.

“Combining this with the slight drop in the number of respondents who see now as a bad time to buy a house, it’s clear that Kiwis are remaining optimistic about further house price rises,” he said.

Low interest rates remained a key driver of housing market sentiment, he said.

“Despite the RBNZ’s OCR hikes last year, fixed-term mortgage rates have been held down and at times even dipped, as global interest rates decline,” Tuffley said.

“Bank competition has added further fuel to the expectation of a lowering of interest rates. And with the RBNZ now signalling that the OCR could remain on hold for an extended period of time, interest rates remain a key factor in influencing sentiment about the housing market.”

Tuffley said house price affordability remained an issue in Auckland. A near perfect storm of high demand and low listings combined to drive a re-acceleration in price.

“When it comes to price, Auckland is standing out from the pack and a reacceleration is increasingly evident,” he said. “Looking at the ratio of regional house prices relative to incomes, or mortgage repayments for first-home buyers, Auckland is standing out as looking quite stretched compared with elsewhere across the country.”

But he said with broader inflation pressures very low, it was unlikely the RBNZ would lift interest rates in the foreseeable future.

“With the OCR on hold, the only option the RBNZ may have to address the housing market is the use of further prudential tools,” Tuffley said.  “At this stage, it’s increasingly likely that the current loan-to-value ratio restrictions will remain in place for longer than we originally anticipated. Consequently, we think late 2015 will be the earliest the RBNZ could remove the restrictions.

“Buyers should also be prepared for further measures - whether directly targeted at property investors, such as increasing the capital banks have to hold against large-scale investors, or more general, such as debt servicing limits.”

A year ago, 70% of survey respondents were expecting higher interest rates over the year ahead.

By July, the RBNZ had lifted the OCR four times, to 3.5%, and signalled it would pause to assess the impact of the tightening delivered.  Since then, respondents’ expectations for higher interest rates have steadily declined.

“At this stage, very few people expect interest rates to decrease over the year ahead, even though mortgage rates have been declining.  A year ago, 2% of respondents expected rates to decrease over the upcoming 12 months, and now 6% have that expectation,” Tuffley said.

“But each month we have observed a fall in the number of people expecting rate increases. In this quarter, a net 34% of respondents expect higher interest rates over the year ahead, down from 55% last quarter.”

A net 6% of respondents believe now is a bad time to buy a house.

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Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
ANZ 5.19 4.05 3.95 4.49
ANZ Special - 3.55 3.45 3.99
ASB Bank 5.20 4.05 3.95 4.39
ASB Bank Special - 3.55 3.45 3.89
BNZ - Classic - 3.55 3.45 3.99
BNZ - Mortgage One 5.90 - - -
BNZ - Rapid Repay 5.35 - - -
BNZ - Std, FlyBuys 5.30 4.45 4.35 4.55
BNZ - TotalMoney 5.30 - - -
China Construction Bank 5.50 4.70 4.80 4.95
China Construction Bank Special - 3.19 3.19 3.19
Lender Flt 1yr 2yr 3yr
Credit Union Auckland 5.95 - - -
Credit Union Baywide 6.15 4.95 4.95 -
Credit Union North 6.45 - - -
Credit Union South 6.45 - - -
Finance Direct - - - -
First Credit Union 5.85 3.99 4.49 -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 4.80 4.95 -
HSBC Premier 5.24 3.35 3.35 3.35
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 5.15 3.18 3.18 3.20
Kainga Ora 5.18 4.04 3.95 4.39
Kiwibank 5.80 4.30 4.20 4.64
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
Kiwibank Special - 3.55 3.45 3.89
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 5.70 4.25 4.15 -
Pepper Money Near Prime 5.64 - 5.44 5.44
Lender Flt 1yr 2yr 3yr
Pepper Money Prime - - - -
Pepper Money Specialist 7.59 - 7.39 7.39
Resimac 4.50 4.86 3.89 3.94
RESIMAC Special - - - -
SBS Bank 5.29 4.85 5.05 5.49
SBS Bank Special - ▼3.55 3.39 3.89
Sovereign 5.30 4.15 4.29 4.55
Sovereign Special - 3.65 3.75 4.05
The Co-operative Bank - Owner Occ 5.15 3.49 3.59 3.89
The Co-operative Bank - Standard 5.15 3.99 4.09 4.39
TSB Bank 6.09 4.35 4.25 4.69
Lender Flt 1yr 2yr 3yr
TSB Special 5.29 3.55 3.45 3.89
Wairarapa Building Society 5.70 4.85 4.99 -
Westpac 5.34 4.15 4.09 4.49
Westpac - Offset 5.34 - - -
Westpac Special - 3.55 3.45 3.99
Median 5.35 4.04 4.02 4.39

Last updated: 11 November 2019 4:01pm

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