Housing and Finance – Kiwis are backing the housing market to continue climbing despite numerous headwinds

Kiwis are backing New Zealand’s housing market to continue climbing despite numerous headwinds according to the latest ASB Housing Confidence Survey.

For the three months to October, a net 62% of respondents said they expected house prices to increase over the coming 12 months, up from a net 58% last quarter. South Islanders are the most house price confident at 65%.

ASB senior economist Mike Jones says, “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.”

“But we’d be remiss not to flag a few big speedbumps we see in the distance. The Reserve Bank is no longer content to let the good times roll, and we’ve long pegged 2022 as the year we finally get some movement on the housing supply imbalance. At the very least, 2022 looks like a year in which lofty housing confidence will be tested,” says Mr Jones.

Buyer sentiment crumbled further this quarter, hitting a five-year low with a net 23% of respondents saying it was a bad time to buy a house. Sentiment was particularly negative in Canterbury, with a net 30% believing it’s a bad time to buy there. This compares to a net 20% in the rest of the South Island, 25% in the North Island outside of Auckland, and 19% in Auckland.

“Wildly-stretched 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. We wouldn’t be surprised to see fresh lows before this cycle is done. We suspect the house price upswing has got a little further to run, and the upward pressure on mortgage rates looks likely to remain,” says Mr Jones.

“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% of those surveyed expect interest rates to rise in the coming year, made up of 75% expecting an increase and just 2% expecting a drop. That’s about as close to universal agreement as you get.”

“We think the pace of recent lifts in mortgage rates, and the prospect of more to come, will finally put the brakeson the feverish housing demand we’ve seen ever since Lockdown 1.0.”

The full ASB Housing Confidence Survey for the three months to October 2021 will be available online at www.asb.co.nz  Other recent ASB reports that also include housing commentary can be accessed via a Search page https://reports.asb.co.nz by selecting the keyword ‘Housing’.

@ASBBank  @ASBMarkets www.asb.co.nz

Notes: The ASB Housing Confidence Survey was constructed from data received from 2814 individual respondents.