Tamaki Makaurau – Nearly three quarters of New Zealanders now expect interest rates to increase, according to a new ASB survey.
But this hasn’t shaken Kiwis’ house price expectations, which actually increased last quarter. Buyer sentiment has hit a five-year-low.
Kiwis are backing New Zealand’s housing market to continue climbing despite numerous headwinds, according to the latest ASB housing survey.
For the three months to October, a net 62 percent of respondents said they expected house prices to increase over the coming 12 months, up from a net 58 percent last quarter. South Islanders are the most house price confident at 65 percent.
Kiwis’ housing confidence has remained stratospheric all year. Credit rationing, tax changes, lockdowns. Nothing has shaken the public’s confidence that house prices are going to keep rising. And, so far, they’ve been right.
However, the Reserve Bank is no longer content to let the good times roll and 2022 should see some movement on the housing supply imbalance.
Buyer sentiment crumbled further this quarter, hitting a five-year low with a net 23 percent of respondents saying it was a bad time to buy a house.
Sentiment was particularly negative in Canterbury, with 30 percent believing it’s a bad time to buy there. This compares to a net 20 percent in the rest of the South Island, 25 percent in the North Island outside of Auckland, and 19 percent in Auckland.
High house prices paired with steep rises in mortgage rates are not a palatable combination for home buyers.
Perceptions of whether it’s a good time to buy are now within a whisker of the all-time low struck in October 2016. ASB suspects the house price upswing has got a little further to run and the upward pressure on mortgage rates looks likely to remain.
What is interesting is that house price expectations remain so high despite the majority of Kiwis saying they expect interest rates to keep rising.
A net 73 percent of those surveyed expect interest rates to rise in the coming year, made up of 75 percent expecting an increase and just 2 percent expecting a drop.
ASB says the pace of recent lifts in mortgage rates and the prospect of more to come will finally put the brakes on the feverish housing demand we’ve seen ever since lockdown #1.