Kiwis’ outlook gloomy for housing future
Fewer New Zealanders expect house prices to rise, an ASB survey shows. Melanie Carroll reports.
New Zealanders’ confidence in the housing market has taken a big knock and is likely to get worse thanks to the economic fallout from the coronavirus.
The housing market was essentially put on hold during the level 4 lockdown, and many people have either lost jobs or may be worried about their work.
A net 14 per cent of respondents to the latest ASB Housing Confidence Survey expected house prices to rise over the next year, compared with 54 per cent in the previous quarterly survey.
‘‘The housing market was literally stopped in its tracks during the lockdown,’’ said ASB chief economist Nick Tuffley.
‘‘Some people are likely to have added concerns about their job security and take a more cautious attitude towards jumping into the housing market.
‘‘The jump in the number of people receiving income support and mortgage holidays highlights that homeownership conditions are more challenging and that recent price momentum is likely to stall’’, Tuffley said.
A net 19 per cent of respondents now expected interest rates to fall.
‘‘The fact that interest rate expectations didn’t fall further likely reflects the unprecedented situation facing the New Zealand economy and the Reserve Bank,’’ said Tuffley.
‘‘Government bond purchases, or quantitative easing, are now the bank’s main weapon in the fight to keep economic stimulus flowing.
‘‘So it’s not that surprising that surveyed participants didn’t expect lower interest rates en masse.
‘‘We expect the Reserve Bank’s policy rate to remain at 0.25 per cent for many years, but there may be some scope for mortgage and business interest rates to fall further.’’
Price expectations took the biggest hit in the South Island, excluding Canterbury, which fell to a net 13 per cent from a high starting point of 65 per cent from the previous survey.
The loss of foreign visitors in the region’s key tourist areas may have been partly responsible, Tuffley said.
Auckland had the smallest decline, from 42 per cent to 10 per cent of net respondents expecting house prices to rise.
For the rest of the North Island, a net 20 per cent of respondents still expected house prices to rise over the coming year.
‘‘If anything, we’d expected the fall in housing confidence to be larger. Our latest research points to a house price decline of 5-10 per cent in the wake of the Covid-19 crisis,’’ Tuffley said.
‘‘This is broadly similar in magnitude to what we saw during the Global Financial Crisis. Yet during that period, we saw housing confidence collapse to -50 per cent.
‘‘Either we are too pessimistic, or housing confidence has further to fall.’’
At the same time, fewer people believed it was a good time to buy a house. A slim majority of respondents said it was a bad time to buy a house, down from a net 9 per cent saying it was a good time to buy in the previous quarter.
‘‘Perceptions of whether it’s a good time to buy are generally closely linked to housing affordability. With Covid-19 disruptions prompting job cuts as well as slamming the brakes on household income growth, it’s no surprise we’re seeing house buying sentiment take another hit,’’ Tuffley said.
‘‘Further falls appear likely.’’
‘‘Perceptions of whether it’s a good time to buy are generally closely linked to housing affordability. With Covid-19 disruptions prompting job cuts as well as slamming the brakes on household income growth, it’s no surprise we’re seeing house buying sentiment take another hit.’’ Nick Tuffley, above, ASB chief economist