Less than a year on from widespread predictions of a drop in house prices, the latest ASB Housing Confidence Survey shows expectations for price rises are at record high levels, a marked sentiment change.
The most recent survey, which covers the three months ended January, shows a net 73 percent of respondents thought house prices would continue to rise in the coming 12 months – the highest in the 25-year history of the housing confidence survey, and a significant lift on the previous 65 percent record high in July 2015.
This tallies with economist predictions, with ASB senior economist Mike Jones predicting house prices to rise a further 15 percent in 2021.
“This is the strongest quarterly result we’ve seen, and is perhaps not surprising given the way the market has been going. It’s an astonishingly quick return to confidence given just six months ago, a net 9 percent of those surveyed felt house prices would drop.
“We’re also seeing confidence in the outlook for prices spread fairly evenly across the country, which is something we don’t always see, however as flagged in the previous survey, this is coming at a cost to home buyer sentiment, which has fallen to a three-year low this quarter.”
According to respondents, the middle of last year was a good time to buy a house, but the opportunity has vanished with a net 8 percent of people now saying it was a bad time to buy, down significantly from last quarter when net 12 percent still felt it was a good time for home buying.
Mr Jones says despite house price confidence, a solid employment market and low mortgage rates, affordability was taking a toll.
“Average house prices in New Zealand are now about eight times the average income. In Auckland, the ratio is closer to 10. Only three out of 92 major global housing markets currently have house price to income ratios north of 10.
“Over summer, houses sold at a pace and in numbers not seen in 15 years, and although sellers scrambled to get in on the action, supply is still not keeping pace with demand. Given this background, the only surprise here is that buyer sentiment isn’t even lower.
Mr Jones says the house price outlook for 2022 is really about how quickly the residential construction boom currently underway can help restore some balance to the market.
“Our view is that rising supply and eventual modest increases in mortgage rates will pull annual house price inflation back down to single-digit levels in 2022. At this stage we don’t expect outright declines in prices, but we do expect house price growth to slow down a little this year.”
The full ASB Housing Confidence Survey for the three months to January 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’.