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Pessimism clouds house price expectations

Price growth expectations nationwide are now at the lowest level in five years, ASB’s latest Housing Confidence Survey has found.

Monday, May 15th 2017, 9:00AM

by Miriam Bell

ASB chief economist Nick Tuffley

The survey, which covers the three months to April, reveals that pessimism about buying a house is deepening around the country.

A net 42% of respondents nationwide expect prices to rise, as compared to 46% in the January quarter.

But this is well down on price expectations in 2016. As recently as the October quarter last year, 58% of respondents thought prices would be going up.

While there has been no change in the net amount of respondents (17%) who think it is a bad time to buy a house since the last quarter, a regional breakdown reveals that pessimism has increased in the regions.

There was just one region that bucked the trend and, surprisingly, it was Auckland.

A net 19% of Auckland respondents think it is a bad time to buy a house which is a decline since last year when 27% thought it was a bad time to buy a house.

ASB chief economist Nick Tuffley said historically-high house prices, higher deposit requirements and expectations for further interest rate increases are likely to be weighing on sentiment generally.

“The overall drop in respondents expecting house price gains likely reflects the recent tightening of lending standards, which has slowed housing market activity in many regions.

“But the fact that the number of homes available for sale in the Auckland property market has lifted recently might explain its reduced degree of pessimism this quarter.”

Apart from Auckland, price expectations eased in all regions – although this trend was most pronounced in Christchurch where those expecting price growth dropped from 44% to 32%.

Tuffley said this is likely to reflect rebalancing after the supply surge that followed the earthquakes.

“In Christchurch, higher levels of residential construction have more than made up for the housing shortage caused by the earthquakes.

“As a result, Christchurch house price growth has been tepid recently.”

The survey also reveals that most people now believe that higher interest rates are on the horizon.

For the first time since October 2014, more than half of survey respondents (51%) expect interest rates to rise - up from 37% last quarter.

Tuffley said that mortgage and term deposit rates have lifted off their lows recently.

“In the US, the election of Donald Trump and recent rate hikes by the US Federal Reserve have seen US interest rates lift, which has lifted New Zealand’s longer term interest rates.”

ASB expects the Reserve Bank to leave the OCR on hold until late 2018, which should provide an anchor to short-term rates, he said.

“However, funding issues and offshore rate increases have seen interest rates creep higher over the past six months.”

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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 ▼4.14 ▲4.30 4.64
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
Kiwibank Special - ▼3.39 ▲3.55 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 5.18 - 4.98 4.98
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 5.34 4.04 4.09 4.39

Last updated: 15 November 2019 4:16pm

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