The number of people expecting house prices to rise is now at close to record levels, according to the latest quarterly ASB Housing Confidence Survey.
"In the three months to January, a net 59% of respondents [to the survey] now expect prices to rise over the next 12 months, just a fraction below the January 2003 peak of 61%," ASB chief economist Nick Tuffley said.
The survey results are consistent with recent actual trends in the housing market, with strong activity matched by rising prices, particularly in Auckland.
Tuffley said price expectations increased the most in Auckland and remained at the highest levels in both Christchurch and Auckland.
Conversely, however, the survey found that there was a drop in the numbers of those believing now was a good time to buy. More people in Christchurch and Auckland actually believe now is a bad time to buy than a good time.
"The overall ASB Housing Confidence Index declined to 13% from 23%. While this decline in confidence was seen across the country, confidence is the lowest in Christchurch and Auckland, Tuffley said.
He believed the decline in confidence reflected the shortage of housing available for sale.
“Listings remain low and have not kept up with the modest increase in demand,” he said.
“Housing inventory levels have fallen sharply and the market is tilted in favour of sellers. Supply shortages have been most acute in Christchurch and Auckland. As a result, price increases are strongest in these areas.”
The survey also covers interest rate expectations.
Tuffley said these remained stable in the latest survey, with only 32% of respondents expecting interest rates to rise over the next 12 months.
“This is consistent with our view on the [Official Cash Rate] and floating mortgage rate,” says Mr Tuffley.
However, Tuffley warned that change may be on the horizon.
“Fixed mortgage rates are likely to increase over the coming year as the market gradually moves to anticipate cash rate increases from the RBNZ.”
In terms of the detailed numbers, a total of 66% of survey respondents expected higher house prices (up from 64% in the last quarter) against 8% expecting lower prices (unchanged). The rest of the respondents fall in the "expect the same" or "don't know" categories.
Just 31% of respondents now say it is a good time to buy a house (37% previously), while 18% (up from 14%), now say it is a bad time and the rest of the respondents either say it is neither a good nor bad time, or they don't know.
On interest rates, 32% (down from 35%), expect higher rates, while an unchanged 8% expect lower rates. Most people, namely 39% (down from 42%), think interest rates will stay the same, while the "don't knows", at 20%, have risen from 16%