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Steep decline in buyer sentiment - ASB

Growing numbers of people around the country think that now is a bad time to buy a house, a new ASB survey shows.

Tuesday, August 16th 2016, 9:00AM 1 Comment

by Miriam Bell

The bank’s latest Housing Confidence Survey has been released and it reveals a sharp drop in house-buying sentiment nationwide in the three months to July.

A net 20% of survey respondents thought it is a bad time to buy, as compared to 3% in the last quarter.

Sentiment is at its lowest level since early 2012, and it is the first quarter since mid-2014 where every region has thought it was a bad time to buy.

ASB chief economist Nick Tuffley said the fall in sentiment is not surprising when expectations for higher house prices, as well as higher interest rates, have picked up over the quarter.

“People appear to be wary of higher debt servicing costs on top of already-high house prices, which has pushed down sentiment.”

Auckland respondents were the most pessimistic, with a net 32% saying now is a bad time to buy.

Tuffley said that, given affordability in Auckland is squeezed more than elsewhere, they would expect to see sentiment continue to drag relative to the rest of the country.

The Reserve Bank’s new LVR restrictions for investors, which will come into force in October, could lead to a further drop in confidence, he said.

“The requirement for investors around the country to have a 40% deposit will undoubtedly knock investors’ confidence.”

However, two factors could prevent a further decline in buying sentiment.

Tuffley said that if the new LVR restrictions do slow market activity and house price growth, potential first-home buyers might look more favourably on the housing market.

Another OCR cut this year could have a similar effect, provided mortgage rates move slightly lower, he said.

“On balance though, high house prices and a higher deposit threshold for investors are likely to weigh on sentiment this year.”

The survey may show a drop in purchasing sentiment, but a majority of respondents think house price will continue on its upward path.

Nationwide, 68% of respondents expect higher prices over the next 12 months, as compared to 59% last quarter.

A net 57% of Auckland respondents expect house prices to rise in the next year, while price growth confidence in the North Island ex-Auckland is at an all-time high of 66%.

Tuffley said house price expectations are likely being influenced by the degree of coverage house prices are getting in the New Zealand media.

“But the across-the-board lift does reflect the prices increase we’ve seen across the country recently.”

Meanwhile, for the first time in more than a year, interest rate expectations have shifted.

In a reverse from last quarter, 24% of respondents expect interest rates to rise while 17% expect them to fall.

Last quarter, 18% of respondents thought interest rates would rise while 25% thought they would fall.

Tuffley said that ASB expects the RBNZ to cut the OCR again in November, following last week’s cut.

“We could then see another turn-around in interest rate expectations in the next survey, particularly if mortgage rates move lower over the period.”

 

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Comments from our readers

On 16 August 2016 at 12:26 pm Winka said:
To begin with, I was not included as a respondent in the said survey??
I wonder at what 'level' the said respondents have as an ability to respond with any true value, maybe a good crystal ball?

However, my main point to make is relative to the OCR and mortgage rates.
When an OCR is reduced when both are at what could be seen as the 'high end' then mortgage rates can fall virtually in line with an OCR.
However, for those who are aware that banks make huge profits from factors such as lending margins, then the simplified fact is that when an OCR gets to the lower end of things, then mortgage rates actually end up rising.
When that happens, coinciding with the 'big bomb' surrounding the USA credit debacle (or 'Bubble' as The 'DON' over there refers to), are such 'respondents' of the belief that we are so immune from any 'fallout?'

Watch this space I suggest, as the imminent mortgage -rates change affects the huge proportional borrowings of NZ'ers who think that houses actually 'inflate' in value.
I have noticed (in my surveys) that there are growing numbers of those opting out of hugely-debted property, and into very good 'income revenue' businesses......at last.
Time will tell if this in writing is in any way accurate? Michael The 'NZ' Don

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Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA 5.35 4.49 5.25 5.55
ANZ 5.54 5.15 5.85 6.15
ANZ Blueprint to Build 2.78 - - -
ANZ Special - 4.55 5.25 5.55
ASB Bank 5.35 4.49 5.25 5.55
Avanti Finance 5.45 - - -
Basecorp Finance 6.45 - - -
Bluestone 5.29 7.49 7.59 -
BNZ - Classic - 4.55 5.25 5.45
BNZ - Mortgage One 5.55 - - -
BNZ - Rapid Repay 5.55 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Std, FlyBuys 5.55 5.35 5.94 5.99
BNZ - TotalMoney 5.55 - - -
CFML Loans ▲6.45 - - -
China Construction Bank 5.50 5.40 6.14 6.40
China Construction Bank Special - 4.45 5.19 5.45
Credit Union Auckland 5.95 - - -
First Credit Union Special 5.85 4.70 5.20 -
Heartland Bank - Online 4.00 3.85 4.70 4.84
Heretaunga Building Society 5.95 4.80 5.50 -
HSBC Premier 5.49 4.39 5.15 5.39
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 5.25 ▲4.29 ▲5.09 ▲5.35
Kainga Ora ▲5.43 ▲4.57 ▲5.58 ▲5.85
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 5.00 5.55 6.19 6.39
Kiwibank - Offset 5.00 - - -
Kiwibank Special 5.00 4.55 5.19 5.39
Liberty 4.84 - - -
Nelson Building Society 5.95 4.95 5.85 -
Pepper Essential 3.44 - - -
Resimac 4.59 5.60 6.16 6.29
Lender Flt 1yr 2yr 3yr
SBS Bank 5.29 4.69 5.35 5.49
SBS Bank Special - 4.19 4.85 4.99
Select Home Loans 4.09 4.29 4.86 5.09
The Co-operative Bank - First Home Special - ▲4.19 - -
The Co-operative Bank - Owner Occ 5.45 ▲4.29 5.19 5.45
The Co-operative Bank - Standard 5.45 ▲4.79 5.69 5.95
TSB Bank 5.59 ▼5.14 6.05 6.15
TSB Special 4.79 ▼4.34 5.25 5.35
Unity 5.65 ▲4.80 ▲5.50 -
Wairarapa Building Society 5.24 4.55 5.20 -
Westpac 5.54 5.09 5.79 6.09
Lender Flt 1yr 2yr 3yr
Westpac - Offset 5.54 - - -
Westpac Special - 4.49 5.19 5.49
Median 5.45 4.55 5.25 5.52

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