Auckland house price hopes ease

The increased optimism on housing prices may be due to new rules that require foreign buyers to register for tax and open local bank accounts. Photo / Jason Dorday

Tax measures and tough loan rules appear to be taking heat out of market.

The number of people tipping a rise in Auckland house prices has dropped.

The latest ASB Housing Confidence Survey for the three months to October showed that of the respondents surveyed, net expectations of Auckland house price rises fell from 71 per cent last quarter to 50 per cent this quarter.

Government and Reserve Bank tax and banking regulations are cited as the main drivers for the change in sentiment.

"Fewer people expecting house price gains in Auckland likely reflects the new housing measures created to take the heat out of the Auckland housing market. The Government's tax measures came into effect on 1 October, and while the RBNZ's new LVR restrictions [were] not due to start until 1 November, banks have already been adjusting their lending practices to align with the new restrictions," the survey said.

A quarter of those surveyed were pessimistic about house buying.

"This quarter, a net 25 per cent of Auckland respondents, regarded now as a bad time to buy a house.

"Extremely high house prices will be continuing to dampen sentiment. The new tax and lending rules may also be adding to the poor sentiment in Auckland," the survey said.

But respondents were optimistic that interest rates would continue to fall. A net 15 per cent of all respondents expected lower interest rates over the year ahead, up from the net 3 per cent expecting lower rates last quarter and a marked change from the net 70 per cent expecting interest rate increases just over a year ago.

The survey is constructed from data received from 2322 respondents and comes after this week's data from realestate.co.nz showed asking prices dropping more than $18,000 from $851,531 in September to $832,713 last month.

Westpac senior economist Michael Gordon said the Barfoot & Thompson data out this week showed volumes traded well down and he thinks prices might be about to drop. Already, the median dropped from September's $790,000 to $780,000 last month.

"B&T's house sales were down more than 20 per cent in seasonally adjusted terms compared to September, returning to around the levels seen before the regulations were announced in May," Gordon said, referring to new restrictions announced by Prime Minister John Key.

From October 1, all investment properties bought and sold within two years are subject to capital gains tax and foreign buyers must register for tax and open a domestic bank account.

"While these restrictions apply nationwide, we would reasonably expect them to have their biggest impact in Auckland, where investors account for a greater share of the market," Gordon said.

"We're still waiting to see how this pans out. It will only become clear with several months of hindsight," he said.

Barfoot data showed 1358 unconditional commission-paid sales in September, falling to 1068 last month. Gordon said Westpac adjusted that to 1378 sales in September and 1091 last month.

"We make the seasonal adjustments as a matter of practice. It's not going to matter significantly every month but you have to do it for the whole data surge," he said.

Adjustment was most useful during the Christmas/New Year period and in March.

"We wouldn't be surprised to see house sales remain subdued over the next few months, with signs of prices cooling by early next year," he said.

Prices were relatively unaffected in the two months, the average up only 0.6 per cent and the more volatile median price down by 0.3 per cent, the Barfoot data showed.

Housing Minister Nick Smith said this week that it was far too early to tell what was happening to the Auckland market and it would be at least February before any clear signals might emerge.

"The Government will be looking at a longer period of time," Smith said. "By about February next year, we will have a clearer idea of the measures and more reliable information on the scale of overseas buyers and have sufficient number of months, whether it's building consent or sales figures."