ASB Housing Confidence Survey: Kiwi House Price Expectations Nearing GFC Lows

Friday, 3 March 2023, 12:44 pm
Press Release: ASB

• Net 43% of Kiwi expect house prices to decrease in the coming year, a further fall from the net 31% last quarter.
• This compares with net 55% of Kiwi expecting house price decreases at the height of the Global Financial Crisis (GFC) in 2008.
• Meanwhile, a net 2% of respondents say it’s not a good time to buy a house.
• More than three quarters of respondents expect higher interest rates over the next year, in line with forecasts.
   

New Zealanders’ house price expectations fell again in the three months to January, closing in on lows last seen during the Global Financial Crisis, the latest ASB Housing Confidence survey shows.

Net 43% of respondents thought house prices would fall in the coming year. This compares to the same quarter a year ago when net 49% thought prices would increase. At the height of the GFC in July 2008, net 55% of respondents thought prices would decrease in the year ahead, and although expectations haven’t hit this low yet, ASB senior economist Kim Mundy says sentiment is likely to fall further.

“The housing market has been weak of late and it doesn’t look like it’s going to turn around any time soon. Housing market activity is heavily linked to the interest rate outlook so it’s not surprising people’s price expectations keep falling given the Reserve Bank has signalled there are more official cash rate hikes to come.

“House price falls have already been higher on a percentage basis than what we saw during the GFC so we might see net price expectations drop down to a GFC low, if not surpass that, in the coming quarters.”

South Islanders outside of Canterbury were the most pessimistic about price expectations, shifting from a net 21% of respondents last quarter expecting prices to decrease in the coming year, to net 47% this quarter. The upper North Island was similar with net 46% saying they thought prices would fall.

“Possibly we’re seeing the regions playing catch up,” says Ms Mundy. “We saw prices drop in the main centres such as Auckland and Wellington first because affordability was most constrained. However, we are now seeing widespread house price falls across the regions as interest rates continue to climb.”

After reaching positive territory last quarter, respondents’ views on whether it is a good time to buy have once again turned negative, with net 2% saying it was a bad time to buy.

Auckland remains the sole optimistic region, albeit less so than in the three months to October - net 2% think it is a good time to buy, down from net 9%. All other regions on balance felt it was a bad time to buy.

“It’s not only interest rates that influence whether it’s a good time to buy or not, it’s also affordability. Given we might be nearing a pause in interest rate hikes it could suggest we’re past the peak in terms of thinking it’s a bad time to buy, because the affordability argument might start to outweigh the serviceability concerns,” says Ms Mundy. “We’re not at the bottom of this housing market cycle yet.”

The latest ASB survey shows a net 78% of respondents expect interest rates to keep rising over the

coming 12 months, with views on this pretty certain – just 9% said they weren’t sure compared to the usual average of 21%.

The full ASB Housing Confidence Survey for the three months to January 2023 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’.

@ASBBank @ASBMarkets www.asb.co.nz

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