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New Zealand could be “edging closer” towards a housing market turning point with expectations about prospects improving, according to an ASB study out today.
The latest housing confidence survey was headlined “Kiwis edging closer to a housing market turning point” and showed sentiment was up, although ASB noted that wasonly by a shade.
“With tentative signs of an uptick in housing market activity and moderating price falls evident in the data, predicting the eventual turning point in the market is a common pastime. Similarly, guessing the turning point for the RBNZ – and thus mortgage rates – is a hot topic of conversation with inflation cooling but well above the RBNZ’s target,” ASB said today.
A growing portion of Kiwis now think that interest rates might be reaching a peak and a larger minority now think that prices are stabilising or perhaps even set to increase.
The largest divide among survey respondents was around whether it’s a good time to buy, with roughly even numbers on either side.
ASB said today that 12 months ago, respondents were largely in agreement that it was a bad time, with fear of overpaying and rising interest rates potentially big concerns, ASB said.
“Given the magnitude of house price easing since then, it may be that more Kiwis feel there are bargains to be had – provided any further mortgage lifts prove manageable,” the survey found.
“For their part, and by a wide margin, the respondents to our survey continue to think house price falls have a bit further to run and interest rates a bit further to rise. But a growing portion of Kiwis now think that rates might be reaching a peak, and a larger minority now think that prices are stabilising or perhaps even set to increase,” it found.
Price expectations improved slightly this quarter, with a net 34 per cent of respondents expecting them to fall further compared to the higher 43 per cent last quarter.
“That still represents a sizable plurality of Kiwis who don’t think the market has found a floor, but it’s the first time we’ve seen a meaningful shift in expectations towards a warming market since mid-2021,” ASB said.
The latest shift was present across the country, but particularly marked in Canterbury and the South Island, where data show house prices may already be on the turn.
The largest divide among survey respondents was around whether it’s a good time to buy, with roughly even numbers on either side. Photo / Ted Baghurst
Respondents were cautious about predicting a sharp price recovery though.
Most of the shift in net price expectations this quarter comes from a lift in the number of respondents who think prices will stay the same or who don’t know where prices will head next.
“This is also pretty understandable – although stronger migration figures are positive for house prices, the likelihood that mortgage rates remain comparatively high will cap at least some housing market upside,” ASB said.
Economist Tony Alexander last month said the housing market rebound was closer than people thought.
Fear of missing out had increased for four months in a row but he could not say buyers felt they needed to be in a hurry.
The market remained in favour of buyers very firmly but attendance at open homes was rising, Alexander said.
“First home buyers have essentially decided that the time is right to make a purchase. Listings are good, interest rates have hit their peaks, vendors are willing to accept conditions, and there remain few investors to compete against. A net 54 per cent of agents say that they are seeing more first-home buyers,” Alexander said.
In April, that was 22 per cent, in January it was -3 per cent, and the latest number is the strongest since October 2021, he said.
Real Estate Institute data on sales during May is due out this week. That will give a clearer picture of activity and pricing activity lately.
Westpac chief economist Kelly Eckhold said the economy seemed very close to the turning point anticipated for some time.
“It’s looking like a trough in the housing market is approaching faster than previously anticipated,” an analysis released last month showed.
Since mortgage rates began rising in 2021, house prices have fallen by an average of 17 per cent nationally.
“However, rising population growth along with lower longer-term mortgage rates are likely to provide a brake on those declines. We’ve revised up our forecasts for house price growth, and now expect that mid-2023 will be the bottom for the housing market. As interest rates are set to remain at contractionary levels for some time, we think the extent of the upswing should be limited although this crucially also depends on the future path of migration,” Westpac’s economic overview said.
Anne Gibson has been the Herald’s property editor for 23 years, having won many awards, written books, founded the National Business Review’s property section in 1985 and covered property extensively here and overseas. She joined the Herald in 2000.
