House prices are expected to keep going up this year. Photo
by Peter McIntosh
House prices appear set to continue rising but economists
caution of a downturn later amid rising interest rates.
While it is likely homebuyers will have a brief respite from
interest rate rises, with the Reserve Bank tipping the next
official cash rate rise will not come until
early next year, declining numbers of house listings and
rising prices will keep pressure on affordability. Median
prices nationally rose $31,000 to $416,000 for July.
ASB chief economist Nick Tuffley said the mood of prospective
homebuyers had hit its lowest point since 2007, based on the
latest ASB housing confidence survey.
''Buyers are becoming increasingly negative while house price
expectations remain resilient,'' he said.
The observation was borne out earlier this week, with Real
Estate Institute data revealing national house sales were
down 13%, while in Queenstown and Dunedin they slumped about
20%, a reflection of heightened regional volatility.
Mr Tuffley said Auckland continued to record stronger house
price gains than anywhere else in the country, while a lack
of housing supply was likely to be frustrating buyers in both
Auckland and Canterbury.
''Recent interest rate rises, the steady increase in house
prices and lending restrictions have all combined to create a
growing mood of pessimism amongst prospective buyers,'' he
Westpac economist Dominick Stephens expects the housing
market to stage a brief resurgence this year, before ''a more
Westpac had for some time been forecasting a modest
resurgence of house price inflation this year before the
market turned more decisively negative later next year, Mr
Housing supply provided a challenge for buyers, impacting
both house price expectations and housing market sentiment.
''There are a low number of houses for sale nationwide.
''Supply will lift gradually as construction picks up, but
this process will take time. Throw into the mix the good
performance of the economy, and we see no immediate driver
for house prices to fall or interest rates to come down in
the near future,'' Mr Stephens said.
Consequently, housing affordability issues were likely to
impact housing market sentiment ''for the next year or two'',
While net migration usually only played a relatively small
role in determining house prices, Mr Stephens said that in
the short term net migration was set to hit an all time high
of 50,000 people per year.
''Sheer weight of numbers means that even that ... will
translate into a reasonable boost to house prices over the
year ahead,''he said.
However, longer term, he was forecasting a migration reversal
when the Australian economy recovered and attracted New
Zealanders back there, plus a further decline when
Canterbury's rebuild started to wind down.
''Slower population growth will surely translate into a
slower housing market in years to come,''he said.
Mr Tuffley of ASB said despite the OCR having risen earlier
in the year, and subsequent flow-on effect to higher mortgage
rates, New Zealanders remained confident house prices would
continue to increase.
''The view that house prices will continue rising remains
prevalent nationwide, with a net 49% of respondents expecting
house prices to increase,'' he said.
Mr Tuffley noted that buyer sentiment had most notably
declined in Auckland, with a net 21% seeing now as a bad time
to buy, compared with a net 10% from April's survey.
Mr Stephens said over the coming years, rising mortgage rates
would become a ''major impediment'' to the housing market.