The Reserve Bank's speed limits on home loans are denting confidence in the housing market, with a sharp rise in the number of Aucklanders especially saying it is a bad time to buy.
The latest ASB Bank survey of housing confidence shows that nationally 17 per cent of people think it is a good time to buy a home, outweighed by 22 per cent saying it is a bad time to buy.
The net 5 per cent negative is the first time the indicator has turned into the red since 2008. The balance of those surveyed said it was neither a good nor bad time to buy or did not know.
But the mood is far more gloomy in Auckland.
In October, a net 29 per cent said it was a bad time to buy in Auckland, compared with a net 17 per cent in the previous survey saying it was a bad time to buy.
The big slump in confidence came at the same time as the introduction of the Reserve Bank's new high loan to value ratio lending limits, brought in at the start of October.
Given that Auckland house prices were much higher than the rest of the country, it was a much more challenging market for a first-home buyer to raise the 20 per cent deposit now needed to get into the market, ASB Bank said.
The loan speed limits were seen as "relatively aggressive" and would lock a subset of buyers out of the housing market, ASB said, and reduce demand "at the margin".
Typically a tight market is seen as a poor time to be buying, with not enough stock for sale and plenty of buyers.
"The Auckland market in particular remains very tight, with the pace of house price growth accelerating over the past few months."
New listings were starting to lift, but remained at low levels, compared with the previous housing boom.
The level of new homes being built remained low with no meaningful increase in the supply, while rising migration was adding to pressures.
There was a small improvement in confidence in Canterbury, though a net 12 per cent still said it was a bad time to buy. ASB said that might reflect a rising supply of new homes.
Even though more people in the national survey think it is a bad time to buy, a net 56 per cent still think house prices will increase, unchanged from the previous survey, three months ago.
"Housing demand continues to rise while supply remains well below demand and the resulting imbalance will continue to place upward pressure on house prices," ASB said.
The Reserve Bank's high loan-to-value ratio LVR restrictions would have a "modest impact" on demand, ASB said.
"However, we do not expect a meaningful reduction in housing market pressures until interest rates and new housing construction increases."
A net 52 per cent of those surveyed expected interest rates to rise in the next 12 months, up from 39 per cent in August. ASB Bank is expecting the first rate rise in March 2014.
House prices would increase in the next year, ASB said.