House price expectations remain elevated in the latest
ASB Housing Confidence Survey with a net 47% of respondents
expecting house prices will increase.
The survey results, to the three months ended January, were a
slight fall from the preceding quarter's survey but was still
a high reading, ASB chief economist Nick Tuffley said.
''The housing market remains tight with the level of house
listings remaining well below demand. The resulting imbalance
will continue to place upward pressure on house prices.''
It was understandable some respondents were expecting some
moderation after the prices recorded over the last year or
so, he said. It was also in line with the view house price
growth would be slower this year than last.
Expectations of house price gains were still the strongest in
Canterbury although not quite as bullish as a year ago.
A net 62% of Canterbury respondents expected house prices
would increase. The figure was as high as 86% in early
North Islanders, including Aucklanders, still expected gains
but the net percentage expecting prices would lift had pulled
back, Mr Tuffley said.
It appeared Aucklanders, and more broadly North Islanders,
were more cautious than those in the South Island.
House prices were higher in Auckland than elsewhere, so there
might be some caution about how much more growth was
possible. A net 48% of Auckland respondents expected prices
would increase, down from 60% in the previous quarter.
For the rest of the North Island, a more conservative 40% of
respondents expected price gains compared to 53% previously,
Mr Tuffley said.
Across Cook Strait the difference was significant. A net 62%
expected house prices would lift in the three months to
January compared to 65% previously.
For the rest of the South Island, the figure was a net 58%
expecting gains, unchanged from the previous quarter.
''An increase in the official cash rate [OCR] at the Reserve
Bank's March 13 meeting seems a near certainty - barring an
external shock or a marked and sudden deterioration in New
The Reserve Bank gave a strong hint in January in referring
to the need to start returning interest rates to more normal
levels ''soon'', he said.
ASB expected a 0.25% rise in the OCR in March, taking it to
2.5%, followed by a gradual series of 0.25% rate hikes to
take the OCR to 4% by late 2015.
''The Reserve Bank's message that higher rates are coming has
been getting through loud and clear.''
Expectations of higher rates continued to lift modestly in
the latest survey, Mr Tuffley said. There was also an
adaptive aspect to the responses as longer-term mortgage
rates had been lifting already in anticipation of Reserve
Bank rate hikes.
Once the OCR was lifted, the floating rate typically went up
in lockstep with each increase. Long-term interest rates were
also influenced by developments in global interest rate
markets, particularly in the United States Treasury market
where rates had been living over the past year.
The combination of high house prices and expectations of
higher interest rates was not great for house affordability.
The mix had seen a further deterioration in confidence and
even more people thinking now was not a good time to buy, he
A net 9% of respondents believed it was a bad time to buy, a
deterioration from the previous survey.
Views on the merit of buying a house tended to reflect the
degree of balance in the housing market, with a tight market
seen as a poor time to be buying, Mr Tuffley said.