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Aucklanders lead the way in seeing a bullish housing market

More and more Kiwis think house prices are past their lows and will increase, ASB’s latest housing confidence report shows.

Monday, October 16th 2023, 10:41AM

That shift reflects the broader trends in the data over recent months, with some timely monthly housing market data showing prices first stabilising, and then making tentative gains.

The shift in views has been particularly marked in the city of sails, with Aucklanders now equally split on whether prices will fall further or start to recover. It’s not surprising to see Aucklanders more bullish on price prospects than Kiwis elsewhere– Auckland housing market activity has recovered a little bit more swiftly than elsewhere in Godzone, Nathaniel Keall, ASB economist says.

“The shift in interest rate expectations has been equally swift, with another strong reduction in the balance of Kiwis expecting further mortgage lifts. That said, a chunky proportion of Kiwis still expect further lifts (about 50%) and a chunk of the shift in the net balance has come from an increase in the number of folks who expect rates to remain unchanged, rather than fall. We agree with that sentiment – while the RBNZ may have stopped hiking, it will take some time for the Bank to contemplate OCR cuts.”

Keall says Kiwis remain largely split on whether or not now is a ‘good’ time to buy a house. “It’s a tricky environment for many buyers and sellers to navigate. With the market no longer decelerating, the risk of shelling out a load of cash for an asset that quickly declines in value is now less acute. But on the other hand, debt servicing costs remain prohibitive for plenty of prospective buyers and sellers.”

Bullish Aucklanders lead the country

House price expectations underwent another sizeable lift this quarter, continuing a trend we saw last quarter. A net 8% of respondents reported excepting to see a fall in house prices, much less than the net 34% expecting further reductions last quarter – or the net 43% anticipating further price declines at the market’s coolest point in late 2022.

The steady recovery in house price expectations is easy to understand in light of the timeliest data we’ve seen. Recent REINZ data continues to point to an improving housing market, with prices lifting about 1.6% since April, Keall says.

All regions saw a rise in net expectations, but Aucklanders are the most bullish, with respondents no longer expecting a drop in prices in net terms. Aucklanders are evenly split on whether there is likely to be an increase or decrease in prices. That’s also understandable in light of the data: since the trough of the market in Q1, Auckland house prices are up more than the national average (+ 2.2%).

All-up, Kiwis are increasingly evenly split on the housing market outlook. Roughly a quarter now expect prices to rise, a little under a third expect prices to trend sideways, and another third or so expect further decreases.

Keall says for the bank’s part it is, straddling the former two camps: we’re expecting the market to continue warming up, but only slower. Housing market activity measures are lifting slowly off a fairly low baseline - days to sell is on a downward trajectory, but taking longer to drop compared to the 2020-21 upswing. While housing demand has had a decent boost courtesy of stronger net migration, interest rates remain in very restrictive territory for many prospective buyers...

Finger on the ‘pause’ button, but no hitting ‘rewind’ yet

We’ve also seen another drop in the number of Kiwis expecting another lift in interest rates. This is the second survey where there has been a sizeable drop, with a net 38% of respondents now expecting further lifts, down from a net 59% last quarter, and a net 78% two quarters ago.

Plenty of Kiwis have been monitoring the shift in tone from the Reserve Bank recently, with Governor Orr & co. leaving the OCR unchanged at their last two meetings. The Bank has signalled that the cash rate may have reached high enough levels to get inflation back into the 1-3% target over time.

Still, few respondents expect rates to come down from their recent highs any time soon. While there may have been a drop in the number of people expecting interest rates to increase, there hasn’t been an equivalent rise in those expecting rates to drop. Instead, a chunk of the shift in the net balance has come via an increasing number of people expecting rates will track sideways from here

In total, three quarters of respondents still expect mortgage rates to either increase further or stay the same, and only 13% expect them to fall in the coming months. We tend to agree it’s prudent for prospective borrowers to be budgeting on rates remaining at or around their current levels for the next 12-18 months. While the RBNZ has signalled it thinks the OCR may not need to rise any further from here, the Bank will want to see inflation getting much closer to target before it contemplates any cuts in the cash rate.

A mixed bag of variables for prospective buyers

The proportion of Kiwis who think that now is a good time to buy a house has grown a little, though respondents remain fairly evenly split on this question. This quarter, a net 6% of respondents believed it was a good time to buy, the highest result since October 2020.

The existing environment is a nuanced one for prospective buyers. With the market no longer decelerating, there’s now less of a risk buyers overpay for an asset that quickly continues to decline in value or find themselves in negative equity. There will be some Kiwis who think that after a 16% peak-to-trough decline, there are now some housing market bargains to be had. On the other hand, with mortgage rates at high levels and unlikely to ease much any time soon, debt servicing is a real challenge for many.

Regional differences have become clearer this quarter. Overall, North Islanders looks much more positive when it comes to buying a house, with Auckland a standout. In Auckland, a net 12% of respondents believe it’s a good time to buy. Given prices in Auckland have outperformed the rest of the country in recent months, it may be that the transition from ‘fear of overpaying’ to ‘fear of missing out’ is happening more swiftly in the City of Sails. On the other hand, those in the South are more circumspect, with a net 3% thinking it is still a bad time to buy.

Tags: ASB

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Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.14 6.75 6.39
ANZ 8.64 7.74 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.14 6.79 6.65
ASB Bank 8.64 7.14 6.75 6.39
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.14 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.74 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 6.79 - -
Co-operative Bank - Owner Occ 8.40 6.99 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.49 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.89 6.55 6.35
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.69 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.74 7.35 6.99
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 7.99 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 6.99 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.65 7.25 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
SBS Bank 8.74 7.74 7.09 6.95
Lender Flt 1yr 2yr 3yr
SBS Bank Special - 7.14 6.49 6.35
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.14 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 7.79 7.55 7.45
TSB Special 8.64 6.99 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - 6.55 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Lender Flt 1yr 2yr 3yr
Westpac 8.64 ▼7.49 7.35 6.99
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - ▼6.89 6.75 6.39
Median 8.64 7.14 6.82 6.65

Last updated: 15 July 2024 11:47am

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