Rate rises fail to dampen enthusiasm in the property market amid tight supply of homes.
Rising interest rates have yet to dent people's expectations that house prices will continue to rise over the year ahead, especially in Auckland and Canterbury.
ASB's quarterly survey of housing market sentiment found a net 49 per cent expected house prices to rise over the next 12 months, virtually unchanged from 48 and 47 per cent in the previous two quarters and historically high by the standards of the 18-year-old survey.
"House price expectations have been quite resilient to the lifts in the official cash rate to date this year and the flow-on effect on floating mortgage rates," Nick Tuffley, ASB chief economist, said.
The slight easing in price expectations over the past year occurred after the Reserve Bank's restrictions on low deposit loans were implemented last October.
In Auckland a net 57 per cent of respondents expect prices to rise, up from a net 52 per cent in the April survey, and in Canterbury a net 59 per cent do, up from a net 55 per cent last time.
Over time, interest rate increases would crimp buyers' purchasing capacity, Tuffley said. But currently strong net immigration was boosting demand.
"And the supply side remains very tight. Listings are still very, very low even though we are getting a bit more construction starting to occur in both Auckland and Christchurch," he said.
"The still-high level of price expectations in both those centres reinforces to us that the slowing of price growth in those regions will remain gradual rather than abrupt. The demand/supply balance is shifting, but in an orderly fashion. So despite price expectations being pretty solid we think price momentum will continue to wane."
Asked if it was a good or bad time to buy a house, 12 per cent said it was a good time and 23 per cent a bad time. The net 11 per cent negative is the worst reading since October 2007.
"It has been weakening steadily for quite some time. Market conditions are still pretty challenging from a buyer's point of view," Tuffley said.
In Auckland a net 21 per cent consider it a bad time to buy, up from a net 10 per cent in the previous quarter.
Tuffley said data from realestate.co.nz indicated the number of houses on the market in Auckland amounted to around 16 weeks of sales compared with 31 weeks for New Zealand as a whole. That lack of supply was likely to frustrate buyers and contribute to the view that now was a bad time to buy, he said. A net 69 per cent of respondents expected interest rates to rise in the next 12 months.
"The survey results predate the Reserve Bank's clear signal in late July that it will now pause its rate-tightening cycle to assess the impact of the 100 basis points of OCR increases it has made since March," he said.
Tuffley does not expect the bank to raise rates again until March next year. The swaps market is pricing in 40 basis points of OCR increases by this time next year.
"With the economy performing well there is no obvious catalyst for house prices to fall, or interest rates to come down in the near future. Accordingly, affordability ... is likely to continue to be a drag on sentiment over the next year or two."
• Net 49% expect house prices to rise over the next 12 months.
• In Auckland a net 57% expect prices to rise, up from a net 52% in April.
• Net 69% of respondents expect interest rates to rise.