House price expectations have jumped ahead in the latest ASB Housing Confidence Survey. A net 65% of respondents expect house prices will increase over the next 12 months, the highest reading since the survey began in 1996.
Interest rate expectations have also changed considerably. A year ago the RBNZ had just finished a tightening cycle, raising the Official Cash Rate (OCR) from its record low 2.5% setting, to 3.5%. How things change! The RBNZ has since cut the OCR by 50bp and is signalling the possibility of more OCR cuts. The ASB Housing Confidence Survey reflects the changing tide, with a net 3% of respondents expecting lower interest rates over the year ahead. That’s sharply down from net 11% expecting higher rates last quarter, and net 70% expecting increases just over a year ago.
A net 11% of respondents see now as a bad time to buy a house. Sentiment dropped in the July quarter, on par with the July 2014 quarter which was the weakest reading since October 2007. House prices (especially in Auckland and Christchurch) have increased dramatically, which will be dampening sentiment. Unsurprisingly, sentiment remains poorest in Auckland and Christchurch, where the markets are tight and affordability has become more stretched in recent years. Further, we may be beginning to see signs that the new housing measures, due to begin on October 1, are also negatively impacting sentiment in Auckland.
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