Expectations that house prices will rise are at a six-and-a-half year low, and the number of people who think it is a bad time to buy has fallen, particularly in Auckland, according to the latest ASB Housing Confidence Survey.
ASB Chief Economist Nick Tuffley said the change in attitude was most likely due to Auckland's softening house prices, where sentiment about whether it was a good time to buy a house was at the highest level since January 2013.
Nationally expectations that house prices would rise were a net 16 per cent for the three months to December, down from 17 per cent in the three months to October. However, the latest survey revealed a difference in sentiment between the North Island and South Island.
Expectations that house prices would rise in the South Island had lifted to a net 30 per cent from 29 per cent, led by Canterbury at net 11 per cent up from 8 per cent previously. Price expectations continued to ease in the North Island to net 20 per cent, down from 23 per cent in the previous survey
"Price expectations have fallen to an eight-year low in Auckland as we continue to see the Reserve Bank of New Zealand's (RBNZ) speed limits taking effect," Tuffley said.
Annual price growth rates had slowed sharply in North Island centres such as Auckland, Tauranga and Hamilton.
In contrast, price growth rates remained at about 10 per cent per annum in the South Island beyond Canterbury, ASB said.
At the same time, fewer respondents viewed it as a bad time to buy a house with sentiment lifting most notably in Auckland, where a net negative 4 per cent said it was a good time to buy a house compared to a negative 11 per cent in the previous survey.
Canterbury was the only region where the majority of respondents thought it was a good time to buy, at a net 2 per cent.
Upcoming housing policy changes might further ease house price expectations, Tuffley said.
"There is a degree of uncertainty around the potential impact of policy changes so investors and home owners are likely to remain cautious and not rush into any major decisions.
"The market will continue to be constrained by population growth and low housing supply for some time."
Most respondents expected interest rates to rise over the next 12 months at a net 31 per cent, although this was down from 35 per cent in the previous survey.
Muted inflation pressures have pushed out ASB's forecast for Reserve Bank of New Zealand rate hikes, Tuffley said.
"We now expect the RBNZ to start lifting the Official Cash Rate in August 2019, though in the meantime offshore interest rate increases could see mortgage rates start to creep up."