New Zealand : House price expectations drop as Auckland market loses heat


Expectations around rising Auckland house prices have plummeted due to new housing measures introduced last year, ASB says.

The rest of New Zealand has also experienced a decline in net price rise expectations, surprising the bank’s economists, especially with interest rates so low.

ASB’s housing confidence survey for the three months to January shows 54 per cent of the 2000 people surveyed expect national house prices to climb in 2016, while only 10 per cent expect a fall.

This resulted in net 44 per cent expecting house prices will increase, down from net 52 per cent last quarter, and well down from the record high of net 69 per cent in the three months to July last year.

Falling house price expectations were most evident in Auckland, with net price gain expectations falling from 50 per cent last quarter to just 30 per cent.

On Monday a survey by Demographia found Auckland homes cost 9.7 times the median household income — or $748,700 on a median income of $77,500.

That made Auckland houses the fifth least affordable in the world.

ASB chief economist Nick Tuffley said price growth had moderated due to new lending rules and investor tax measures introduced last year.

In October residential property bought and sold within two years would be subject to a capital gains tax, unless it was the family home, inherited, or needing to be sold because of a relationship split.

At the same the Reserve Bank introduced new loan-to-value ratios (LVR) requiring residential property investors in Auckland to have a deposit of at least 30 per cent.

“House price expectations are likely to remain subdued in Auckland until the extent of the impact of last year’s new housing measures are better known,” Tuffley said.

But a decline in net price expectations in the rest of the country had come as a surprise, Tuffley said.

“Recent trends have indicated that the Reserve Bank of New Zealand’s (RBNZ) new lending measures have bought an accelerated house price growth outside of Auckland, something we had expected to see.

“Yet this survey doesn’t show any strengthening of price expectations beyond Auckland.”

Sentiment about whether it is a good time to buy remains low with 16 per cent saying it is a good time and 21 per cent saying it is a bad time.

Last quarter 16 per cent believed it was a good time to buy and 24 per cent did not.

“High house prices and the tight housing market will be continuing to weigh on sentiment,” Tuffley said.

Expectations for interest rates to fall had also eased with 18 per cent expecting higher interest rates over the coming year and 24 per cent expecting lower rates.

Last quarter 20 per cent expected higher interest rates and 35 per cent expected lower.

ASB expects the RBNZ to cut the OCR by 50 basis points over 2016.

In 2015 the RBNZ cut the OCR by 100 basis points taking it to a record low of 2.5 per cent.

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