Kiwis are losing confidence in property market growth, at least in the North Island. According to the latest ASB Housing Confidence Survey, price growth expectations are at an eight year low in Auckland, with a sharp divide found between the North and South Island in terms of confidence going forward. Despite increased confidence in Canterbury, pessimism in the north has led to national house price expectations at a six and a half year low. While most survey respondents still think it's a bad time to buy property, people are more positive than they've been in nearly two years.
According to the ASB, "House price expectations crept lower in the three months to January according to the latest ASB Housing Confidence Survey. Interestingly, however, a North/South divide seems to have established itself in the last three months. That is, while overall price expectations dipped, this was driven by respondents in the North Island. In contrast, South Island house price expectations rose in the three months to January." Most survey respondents expect interest rates to rise over the next year, although the current low inflation environment means there is less conviction than in previous quarters.
House price growth in 2017 was the slowest it's been since 2012 according to the Real Estate Institute of New Zealand (REINZ). Prices have slowed the most in Auckland and Waikato, with the median New Zealand sale price sitting at $520,000 in January and the median Auckland sale price at $820,000. According to the survey, reduced price growth has been accompanied by reduced expectations, with just 36 percent of respondents expecting higher prices over the course of the year and 20 percent expecting prices to fall. This is the lowest level of confidence in six and a half years, with a net balance of just 15 percent expecting higher prices, 29 percent expecting the same prices, and 14 percent not knowing.
While expectations are easing thanks to the current low inflation environment, most respondents are also expecting higher interest rates over the course of the year. In the ASB survey, 37 percent of people expect rates to rise and 6 percent expect them to fall in the next 12 months, numbers which were 40 percent and 5 percent respectively in the last quarter. According to ASB Chief economist Nick Tuffley, "We now expect the RBNZ to start lifting the Official Cash Rate in August 2019, though in the meantime offshore interest rate increases could see mortgage rates start to creep up."
Despite low price growth, most Kiwis still think it's a bad time to purchase property, with 20 percent saying it's a bad time to buy and 13 percent saying it's a good time to buy. This result is the most positive it's been in almost two years, however, with reduced house prices and subdued interest rate expectations leading to increased optimism across the country. Overall, the majority of respondents at 53 percent are ambivalent to whether or not it’s a good time to make such a large purchase decision. Canterbury was ahead of the curve, with a positive net difference of 2 percent thinking it’s a good time to enter the market.
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