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Affordability under pressure - ASB

Expectations that house prices will rise are at a three-year high but that means less people think now is a good time to buy a house.

Thursday, March 12th 2020, 6:00AM

by The Landlord

That’s according to ASB’s latest Housing Confidence Survey which shows that house price expectations are up for the third quarter in a row.

A net 54% of respondents to the survey, which covers the three months to January, now expect higher prices, as compared to a net 27% last quarter.

This boost was largely led by Auckland with a lift from net 2% to net 42% expecting house prices to rise. All other regions also experienced an increase but on a more measured scale.

ASB chief economist Nick Tuffley says the continued lift in house price expectations is very much consistent with their reading of the New Zealand housing market tea leaves.

“The lift in Auckland house price expectations has been pretty spectacular in a short space of time.

“Housing demand is running hot on the back of the large falls in mortgage rates we’ve seen over the past year and the cancellation of the capital gains tax in April.

“At the same time, the supply of new listings to market has remained fairly anaemic. House prices are squeezing higher as a result.”

However, buyer sentiment fell over the three months covered by the survey. A net 9% of respondents now say it is a good time to buy a house, down from a net 13% last quarter.

The decline in sentiment was most noticeable in Auckland and the South Island outside of Canterbury, where it fell six percentage points and eight percentage points, respectively.

“Perceptions of whether it’s a good time to buy are generally inversely related to rates of house price inflation,” Tuffley says.

“The fact that buyer perceptions suffered a setback this quarter is not particularly surprising, given the galloping price expectations.

“Despite strong wage growth and record low interest rates, housing affordability is clearly under pressure again thanks to rising house prices.”

At the same time, respondents’ expectations on whether interest rates would fall again were dialled back.

A net 0% expected rates to rise, which was a significant increase from the net 31% who expected rates to fall in the previous quarter.

Tuffley says respondents’ interest rate expectations have been wrong-footed several times over the past year - thanks to volatility in the global and local economies and some mixed signals from the Reserve Bank.

But recent events suggest that lower rates are on the way once again and expectations could be whip-sawed again next quarter, he says.

“That’s due to the outbreak of the coronavirus and increasingly synchronous response by the world’s monetary authorities. We now expect the Reserve Bank to lower interest rates in both March and May and would not rule out a large 50bps cut at some stage.”

Tags: affordability ASB Auckland average price confidence house prices housing market interest rates investment mortgages Nick Tuffley OCR RBNZ real estate Reserve Bank

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Lender Flt 1yr 2yr 3yr
AIA 4.55 ▲2.85 ▲3.25 3.55
ANZ 4.44 ▲3.20 ▲3.59 ▲4.00
ANZ Blueprint to Build 1.68 - - -
ANZ Special - ▲2.60 ▲2.99 ▲3.40
ASB Back My Build 1.79 - - -
ASB Bank 4.45 ▲2.85 ▲3.25 3.55
Basecorp Finance 5.49 - - -
Bluestone 3.49 3.34 2.99 3.34
BNZ - Classic - ▲2.85 ▲3.25 ▲3.55
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Std, FlyBuys 4.55 ▲3.45 ▲3.85 ▲4.15
BNZ - TotalMoney 4.55 - - -
CFML Loans 4.95 - - -
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.95 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 2.95 3.45 -
Heartland Bank - Online 2.25 1.85 2.35 2.65
Heretaunga Building Society 4.99 3.80 3.90 -
Lender Flt 1yr 2yr 3yr
HSBC Premier 4.49 2.19 2.45 2.69
HSBC Premier LVR > 80% - - - -
HSBC Special - 2.25 - -
ICBC 3.69 2.35 2.75 3.05
Kainga Ora 4.43 2.88 3.28 3.59
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 3.75 3.50 3.74 4.34
Kiwibank - Offset 3.75 - - -
Kiwibank Special 3.75 2.65 2.89 3.49
Liberty 5.69 - - -
Nelson Building Society 4.95 2.99 3.24 -
Lender Flt 1yr 2yr 3yr
Pepper Essential 4.79 - - -
Resimac 3.39 2.98 2.79 3.29
SBS Bank 4.54 2.99 3.39 3.59
SBS Bank Special - 2.49 2.89 3.09
Select Home Loans 3.49 3.34 2.99 3.34
The Co-operative Bank - First Home Special - 2.35 - -
The Co-operative Bank - Owner Occ 4.40 2.55 2.95 3.39
The Co-operative Bank - Standard 4.40 3.05 3.45 3.89
TSB Bank 5.34 3.35 ▲3.75 ▲4.05
TSB Special 4.54 2.55 ▲2.95 ▲3.25
Wairarapa Building Society 4.99 3.55 3.49 -
Lender Flt 1yr 2yr 3yr
Westpac 4.59 ▲3.45 ▲3.85 4.09
Westpac - Offset 4.59 - - -
Westpac Special - ▲2.85 ▲3.25 3.49
Median 4.54 2.92 3.25 3.49

Last updated: 20 September 2021 8:55am

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