There has been a marked downturn in the numbers of people picking now as a good time to buy a house, according to the latest ASB Housing Confidence Survey.
The survey, for the three months to July, found that of those responding to the survey, 21% thought now was a good time to buy a house - but this was matched by 21% saying that it was a bad time. Some 42% said it was neither a good nor bad time and 16% didn't know.
This left a net 0% of respondents picking now as a good time to buy down from a net 8% in April and a net 13% in January.
In Auckland, centre of much of the heat in the current market, the numbers of people picking this as a bad time to buy a house continued to surge. In the latest survey a net 15% of respondents said it was a bad time, up from a net 10% in April and a net 1% in January.
In Christchurch, which is seeing its house market come under pressure for very different reasons, a net 16% of respondents, up from 9% last time, picked now as a bad time to buy.
House price expectations continue to be high.
While the numbers of those expecting price rises have dropped to a net 56% from a record net 63% in April, ASB says this is likely a result of a change in survey provider and "slight methodology differences".
"This appears to have contributed to a lower net percent expecting prices to increase relative to the old survey in the same period, ASB chief economist Nick Tuffley and senior economist Jane Turner said.
"The monthly survey results between April and July from the new provider shows net price expectations steadily increased in each month. This suggests that price expectations are still rising. Net price expectations remain highest in Canterbury and Auckland, where the housing market remains tightest and house prices are rising rapidly.
"...Fundamentals, such as income and population growth and relatively low interest rates, will continue to support housing demand over the coming year. "
With high price expectations have come anticipation of interest rate rises.
"The biggest bloc of respondents (44%) expect interest rates will rise over the next twelve months, while 27% expect rates to remain unchanged.," Tuffley and Turner said.
"Only 5% expect interest rates to decline. At 24%, the number of respondents who don’t know is relatively high, indicating the high degree of uncertainty around the economic outlook."
A net 39% therefore expect higher interest rates, up from a net 30% in April and just a net 24% in January. ASB expects that the Reserve Bank will start raising official interest rates in March next year.
"Some fixed-term mortgage rates have started to increase to reflect the likelihood of a higher floating rate in the future," Tuffley and Turner said.
"In assessing when to lift the [Official Cash Rate], the RBNZ has to weigh the gradual pace of economic recovery and the impact of the elevated [New Zealand dollar] against growing inflation pressures, particularly against the back drop of the Canterbury rebuild.
"The recent decline in the NZD means the RBNZ can now focus on the rise in domestically-generated inflation pressures. At the July OCR review, the RBNZ linked future OCR increases to the inflationary impacts of rising house prices and construction costs. For the time being, inflation pressures are reasonably contained and headline inflation is sitting below the RBNZ’s target band of 1-3%.
"However, we expect inflation to increase sharply over the next few quarters. We continue to expect the RBNZ will first lift the OCR in March 2014."