“Combined expectations for lower rates and slightly weaker house price growth this quarter is an indication that while we are nearing a tipping point in the market, we’re not quite there yet,” said ASB senior economist Kim Mundy.
Mundy said there are a lot conflicting factors playing out in the market at the moment, including uncertainty about when the RBNZ will begin lowering the OCR, house price forecasts being revised down and inventory levels sitting at about 10-year highs.
“We’re seeing this come through in a split between groups. For first-home buyers and investors who are able to manage current interest rates, it may be feeling like a good time to buy,” Mundy said.
“However, those needing to sell their house to buy or who are concerned about the rising unemployment rate or cost of living may be a lot less confident.”
An unchanged net 2 per cent of survey respondents said it was a good time to buy, and more than half (55 per cent) of all respondents said it was neither a good time nor a bad time.
“Sentiment has turned very tentatively in favour of lower interest rates, and while we think this may be slightly premature, it is often a good indicator of future house prices. We saw this in the last rate expectation turn in late 2020 and early 2021, which was closely followed by the peak in house price growth at around 30 per cent midway through 2021,” Mundy said.
“Given our view is that OCR cuts are unlikely before next year, it isn’t surprising that price expectations are muted, but we will be watching rate expectations in the coming quarters.”
Last week, the RBNZ left its forecast for OCR cuts – the second quarter of next year – largely unchanged as it kept rates on hold at 5.5 per cent.
It said monetary policy would need to stay “restrictive for longer than anticipated in the February meeting, to ensure the inflation target is met”.
The RBNZ sees inflation returning to its 1 to 3 per cent target range by the end of 2024.
