Rest of New Zealand feels ‘Halo effect’
• House price expectations for the North Island (outside of Auckland) are near record highs as the ‘Halo effect’ gains momentum.
• New Zealanders generally expect interest rates to fall, helping boost both sentiment and house price expectations.
The number of people expecting price gains in the housing market has risen to a net 50% in the first quarter of 2016, according to the latest ASB Housing Confidence Survey.
The survey, conducted by ASB, indicates respondents believe the upward house price momentum has not yet ended. And while confidence in further house price increases is below that of the peaks during 2014/2015, 59% of respondents do expect higher house prices.
ASB Chief Economist Nick Tuffley says due to the trending increase, the average house price across the country is expected to rise again in 2016.
“Influenced by higher Auckland house prices, the spill-over effect from Auckland property prices in earlier quarters, and due to the still-declining interest rates we expect the nationwide average house price to increase around 5-6% over 2016,” Mr Tuffley says.
Further cuts expected
The interest rate outlook is little changed from this time last quarter, with a net 7% of respondents expecting interest rates to decline over the next 12 months.
“The Reserve Bank cut the Official Cash Rate in March by 25bp to 2.25%, and indicated further easing may be required,” Mr Tuffley says.
“We expect the Reserve Bank to cut the OCR by an additional 50bp over 2016.”
Good time to buy a house – if you live outside Auckland
A net 16% of people in Auckland believe now is a bad time to buy a house in the country’s biggest city. Moreover, the general trend appears to be the Auckland house price gain of earlier quarters spilling over into other parts of the country.
“A key factor is likely to be the inter-related issue of sharply higher Auckland house prices and, in spite of the low interest rates, the high mortgage repayments,” Mr Tuffley says.
While national figures show people believe now is a bad time to buy a house, the regional split shows a different story, with 17% of respondents believing now is a good time to buy. This expectation is strongest in the South Island, outside of Canterbury.