ASB Housing Confidence survey shows Kiwis are bullish about house price growth, despite looming headwinds

13 September 2021

  • Surveyed house price expectations have remained high again this quarter.
  • Net 54% of respondents now expect interest rates to increase.
  • ASB expects house price growth to drop to just 2% next year.

Pricing optimism in New Zealand's housing market is proving hard to dent, with net 58 percent of Kiwis still expecting house prices to increase in the coming 12 months, despite widespread predictions of a rapid slow-down or price drop, according to the latest ASB Housing Confidence survey. 

ASB economists are now forecasting annual house price growth to drop to just two percent next year, flat-lining compared with the double-digit growth we've seen over the past year. Chief economist Nick Tuffley says he's not surprised Kiwis are doubtful of a slowdown, particularly with housing demand still outstripping supply.

"Given the recent government changes and new regulations have so far only slightly impacted the market, it's understandable that Kiwis are sceptical about a slow-down, particularly as annual house price growth has most recently hit 30 percent. For many watching the runaway housing market, it may be hard to imagine ever seeing a decline. Despite this, there are a number of factors which are increasingly likely to put the brakes on."

"This year the RBNZ has reintroduced its Loan-to-Value Ratio (LVR) restrictions, the Government hit property investors with a tax hammer, and there has been some upward creep in mortgage rates. Behind the scenes, inbound migration has ground to a halt and home completions have lifted, which should ease demand slightly, although we now have construction delays due to supply bottlenecks to contend with.

"Quite amazingly, Kiwis showed no real difference in price expectations for the quarter in question."

House price expectations may be holding steady, however, interest rate rises are increasingly being viewed as inevitable, with net 54 percent of those surveyed expecting higher rates in the coming year - a significant turnaround from the net 13 percent that expected a drop in the first quarter survey.

"The latest lockdown gave an OCR lift a temporary stay of execution but inflation pressures are likely to remain just as chronic, despite the disruption. It was very clear the RBNZ intended to lift the OCR on August 18, but only held off because of the just-announced COVID community outbreak. At this point the RBNZ still looks likely to move very shortly, and we are predicting an October OCR increase. The longer the lockdown in Auckland lasts, however, the more likely it will continue to pause to assess how the longer-term picture has been changed (or not)," says Mr Tuffley.

Unsurprisingly, perceptions of whether it is a good time to buy remain negative, with 20 percent saying it was a bad time to buy, down only slightly on last quarter's 21 percent.

Sentiment could change quickly, however, as the RBNZ prepares to add new headwinds to the housing market.  Mr Tuffley says despite the high level of confidence, the tide is going out and house price growth is likely to be dead in the water in 2022. The full ASB Housing Confidence Survey for the three months to July 2021 will be available online at www.asb.co.nz. Other recent ASB reports that also include housing commentary can be accessed via a Search page https://reports.asb.co.nz by selecting the keyword 'Housing'.

Media Centre Media Releases ASB Housing Confidence survey shows Kiwis are bullish about house price growth, despite looming headwinds