Price rise predictions hit house-buying optimism
After a year of stability, optimism about buying a house has rapidly declined.
A near-record number of respondents in ASB's quarterly survey of housing confidence expect house prices will rise further in the next year, a net 59 per cent.
That was just fractionally below the survey's highest level of 61 per cent in January 2003, with exceptionally high expectations in Christchurch and Auckland.
As a result, fewer people felt now was a good time to buy. The number of people who still felt they would get good value sank to a net 13 per cent, compared with 23 per cent in the previous quarter.
ASB chief economist Nick Tuffley said the loss of confidence prevailed across the country.
It reflected the conundrum that although would-be house buyers were more confident about their financial prospects, they were faced with the realities of shortage of supply.
"The market looks like it's pretty buoyant but at the same time prices are going up, it's hard to find a house that's good enough for you and when you do find a house that's right, you've got huge competition for it."
In Auckland especially, low listings and a long period of under-building had tilted the market in the seller's favour.
Barfoot and Thompson, Auckland's biggest real estate agency, had fewer listings on its books than at any time over the last housing boom.
"That gives you an idea of how few houses are coming to market."
House prices rose 7.2 per cent in the past year to January, according to the Real Estate Institute's stratified median house price index.
But up until six months ago, the price rises were thought to be largely localised, driven by under-building and population growth in Auckland and supply shortages after the Christchurch earthquakes.
Now records indicate that prices have been creeping up in other parts of the country as well.
Analysts say the demand is coming largely from first-home buyers and investors as interest rates stay low and people feel more confident about their job prospects.
But their interest has been thwarted by low levels of new housing to meet demand.
Although expectations of rising house prices now seemed "firmly embedded", Tuffley said the good news was that they were likely to eventually slow down.
"We don't think prices can keep rising as they have been and that those dynamics will shift."
A key factor was interest rates. The survey showed slightly fewer people expected interest rates to rise over the next 12 months, a net 24 per cent.