More Kiwis expect housing prices to keep rising in the year ahead as supply constraints put pressure on real estate markets across the whole country.
That's according to ASB's quarterly housing confidence survey, which found a net 56 per cent of respondents in the three months to October expect the cost of a home to go up in the next year – a level that's just 5 percentage points shy of the 61 per cent record high seen in January 2003.
The survey found that while price expectations rose across all regions, they were more concentrated in the North Island (excluding Auckland), which chalked up its second successive large increase from 41 per cent to 50 per cent.
Christchurch remained the region where price expectations remained the highest, up to 78 per cent from 77 previously, suggesting quality dwellings will remain in demand amid a protracted delay in the earthquake rebuild.
Auckland was also elevated, up to 61 per cent from 58 per cent.
"The New Zealand housing market continues to suffer from low levels of supply," said ASB chief economist Nick Tuffley. "Despite rising sales and prices, listings have been slow to respond. The result has been continued low inventory levels and further increases in prices over recent months."
The survey found the rising prices were matched by improving levels of optimism towards housing, with a net 23 per cent of respondents saying they feel now is a good time to buy a house, up from a net 22 per cent in the previous three months.
That matches a general trend of improvement over the course of the year. However Auckland is the one region where confidence has slipped, coming in at 8 per cent for the three months to October, down from 18 per cent at the start of the year.
"That may be a symptom of the exceptionally tight Auckland housing market; levels of inventory are now lower than at any time since the late 1990s, making a challenging market for prospective buyers," Tuffley said.
The general level of improved confidence was matched by the perception that interest rates would begin to rise in the next 12 months.
The survey found a net 27 per cent of people expect the Reserve Bank to start hiking the official cash rate - from its record 2.5 per cent low - over the next year, up from a net 21 per cent in the previous quarter.
Expectations of higher rates increased the most outside the main centres of Auckland and Christchurch, Tuffley said, but the chance of an OCR cut seems to have faded as the international outlook stabilised during the latest survey period.
He said he expects nationwide housing prices will increase at a modest rate of around 4 per cent annually, largely due to supply constraints, with Auckland and Christchurch seeing the most price growth.