Housing confidence rises as interest rates continue to fall

The number of people who believe now is a good time to buy property increased significantly in the October quarter. Photo / Fiona Goodall

Housing confidence is continuing to rise with a significant jump in the number of Kiwis who believe now is a good time to buy, ASB data shows.

The bank’s latest Housing Confidence Survey shows a net 24% of respondents expect house prices will rise in the three months to October, up from a net 13% in the previous quarter.

A net 20% believe now is a good time to buy, up from 8%.

Falling mortgage rates are largely driving the confidence boost. And a net 57% of respondents expect lower interest rates to come – the highest rate recorded since the survey began in 1996 – and up from 20% in the three months to July.

Optimism is particularly strong in Auckland, where a net 29% of respondents are expecting house price increases, up from 13% last quarter.

But ASB senior economist Kim Mundy said while the data was encouraging, expectations for house price gains were growing at a relatively slow pace.

“While the housing market is certainly poised to pick up, and Reinz (Real Estate Institute) data shows sales activity is already on the rise, it may take some time before this translates into a pronounced upswing in house prices.

“Our survey data shows overall confidence levels remain lower than what we observed at the start of the year (close to 72% of those surveyed expect house prices to remain flat or rise, compared to 90% in Q1 2024) which suggests New Zealanders may be concerned about other economic impacts that may hinder house price gains such as rising unemployment and slowing net migration.”

And while more people shifted their opinion from it being a “bad” to a “good” time to buy, a significant number of respondents (48%) remain undecided.

“With another 50 basis points (bps) cut to the Official Cash Rate (OCR) forecast this week and further cuts anticipated in 2025, we expect New Zealanders’ expectations around each of the metrics we track against to evolve in line with our view that we’ll start to see higher house prices in 2025,” Mundy said.

The Reserve Bank makes its final OCR decision for the year on Wednesday at 2pm.

Nathan Miglani, managing director and senior adviser at NZ Mortgages, said he could clearly see first-home buyers will be competing with property investors again after four years.

“Property investors were out of action over the last four years due to high interest rates... but now in our office, half of the applications we are doing are for property investors.

“We are highly encouraging first-home buyers to take this quite seriously. From now until still March, April, is a great window of opportunities.”

Data released last week from CoreLogic showed first home buyers set a new record in October, making up nearly 28% of purchases in the month.

Multiple property owners (MPOs) accounted for 23% of purchases in October, indicating investors were returning to the market.

But while property sales activity increased by 16% in October compared to the same time last year — the 17th increase in the past 18 months – sales volumes remain 10–15% below typical seasonal levels.

Cameron Smith is an Auckland-based journalist with the Herald business team. He joined the Herald in 2015 and has covered business and sports. He reports on topics including retail, small business, the workplace and macroeconomics.