Summary. Housing confidence was knocked backed substantially in the three months to April. It seems the economic fallout from COVID-19 has dashed expectations of the housing upswing carrying on through the remainder of 2020. Confidence is now closing in on 8-year lows and we’d expect further falls next quarter. House buying sentiment also continued to stutter in the three months to April. Perceptions of whether it’s a good time to buy are generally closely linked to housing affordability. And with recessionary economic conditions resulting in job cuts and a big hit to household income growth, it’s no surprise households are hunkering down. As with house price expectations, household interest rate expectations were whipsawed in Q2. A net 19% of respondents now expect interest rates to fall. That expectations didn’t fall further likely reflects the unprecedented situation facing the NZ economy and Reserve Bank. The Bank’s key policy rate has been lowered as far as it can go and government bond purchases are now the Bank’s weapon of choice. We expect the Reserve Bank’s policy rate to remain at 0.25% for many years, but there may be some scope for mortgage and business interest rates to fall further.
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