Big drop in the number of people who think it's a good time to buy a house, ASB survey shows

Property

Just 22% of people think it's good time to buy a house according to ASB's latest Housing Confidence Survey, which was taken before coronavirus became a big issue

12th Mar 20, 5:00am by Greg Ninness

Fewer people believe it's a good time to buy a house, according to ASB's latest Housing Confidence Survey.

The survey was carried over the three months to the end of January, just before the economic impacts of coronavirus started becoming a major issue.

It found that just 22% of respondents believed it was good time to buy a house, compared to 27% who thought it was a good time to buy in the previous survey, taken over the three months to the end of October last year.

However just 13% thought it was bad time to buy, which was unchanged from the previous survey.

The biggest group by far (53%) were those who thought it was neither a god nor bad time to buy, up from 49% in the previous survey, while the rest didn't know.

"The trend improvement in buying sentiment of the past few years was brought to a halt in January," ASB said in its report on the survey results.

The change in buying sentiment is likely due to changes in people's expectations around movements in house prices and mortgage interest rates.

There were 54% more people who thought house prices would rise over the next 12 months than those who thought they would fall or stay the same, which was up from 27% in the previous survey.

At the same times the numbers who thought interest rates would rise or fall were evenly balanced, whereas in the previous survey the balance was strongly in favour of those who thought interest rates would fall over the following 12 months.

However, as ASB's report notes, "Respondents' interest rate expectations have been wrong-footed several times over the past year thanks to volatility in the global and local economies and some mixed signals from the RBNZ."

That volatility is likely to continue, with the economic environment now far more volatile and uncertain now than it was during the three month period when they survey was undertaken.

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61 Comments

by guwop | 12th Mar 20, 5:56am 1583945810

It is a tremendous time to buy an NZ wind box with build-in ventilation.

by lastlegs | 12th Mar 20, 9:42am 1583959327

they wont blow away,we nailed them together and called them townhouses.

by Basil brush | 12th Mar 20, 6:41am 1583948463

Greg, in your opinion what surveys, reports or announcements are we to keep an eye on to get a first glimpse into the impact Covid19 is having or likely to have on the housing market?

by Smalltown | 12th Mar 20, 6:48am 1583948891

Those that think it's a good time for buying a house would probably also think it's a good time for a cruise - not playing with a full deck.

by Avocado | 12th Mar 20, 6:53am 1583949220

I think most people on this site know we are in for a massive slow down and probably the biggest we will see in our life times but it would be good to have an article about different ways it will affect NZ and our housing market and predictions on a timeline. Maybe even get a poll going to get everyone involved.

by Carlos67 | 12th Mar 20, 7:17am 1583950654

Agreed Avocado its all about the timeline. Predictions are a waste of time without dates. Clearly the 22% who thought it was a good time to buy has now crashed unless they are living under a rock. Still wouldn't take much of a fall in prices for it to suddenly be a good time to buy again. So how long until the property market falls but will they even allow it to fall ? You have to wonder how we even got here. The definition of stupid is repeating the same thing and expecting a different outcome. More OCR cuts anyone ?

by Avocado | 12th Mar 20, 7:54am 1583952895

Yup, I get the feeling money will get pumped in form thin air to keep shit afloat in all countries going forward but eventually something will have to give or the riots will start. After 2008 do you think the USA public will be OK with all their tax payer dollars going into the hedge funds and shitty over leveraged banks and failing Shail Oil industry.

by Fritz | 12th Mar 20, 8:23am 1583954588

I actually think it could be a very good time to buy now, especially for first home buyers with good deposits and secure jobs.
Mortgage rates are likely to fall below 3% in the next couple of months and there will be less competition in the market.

by RickStrauss | 12th Mar 20, 9:20am 1583958021

Could be a good time for those with large deposits if prices ease down. If others are struggling to get credit they could be in a reasonable position. Depends how much things move in terms of prices.

by house hunter | 12th Mar 20, 9:24am 1583958286

The best time to buy is when everyone else thinks it's a bad time to buy.

by CJ099 | 12th Mar 20, 7:04pm 1583993072

Did TTP tell you that?

by house hunter | 12th Mar 20, 9:03pm 1584000239

TTP thinks that the best time to buy is all the time!

by Independent_Observer | 12th Mar 20, 10:24am 1583961874

Problem is, that in the purchase of such a leveraged asset, that could be so overvalued, when do you call the bottom? Based on previous property bubbles (if that is what we have), then prices could fall 50%. And on the average house, now valued at $600,000, you could in theory find yourself $200,000 below water if you get the timing wrong (say based on a $100,000 deposit). Who wants to make that call now?

by Fritz | 12th Mar 20, 11:33am 1583966017

Property will be fine this year. 2021/2022 is another story.

by Keen Observer | 12th Mar 20, 9:19pm 1584001164

Fully agreed, 2020 is already trending hold when just about to nudge up. For sure the 21/22 story is up higher than 2020. My advise is don't wait for too long, the good time to buy is today, tomorrow it will increase again. Words in the market, off springs of the Covid19 victims, already cashed out their inheritance, now seeking an easy place to park it as investment, friendly country, you can buy your residency with the RE exchange hands. This is exciting news for nationwide RE agents.

by Chris-M | 12th Mar 20, 11:35am 1583966158

May be, may be not.
I am concerned that the reporting of the death rate as a percentage of the infections is misleading. Anyone infected can still die until they have recovered. The only concrete measurement is to calculate the rate using the number of deaths and recoveries.

i.e. death rate = number of deaths/(number of deaths + number of recoveries) X100%

I have been tracking the statistics on this basis and it appears that the death rate is trending to a figure somewhere between 5% and 6% .
As we are now in a pandemic situation this means that we are at a very high risk of a large number of people dying. Up to 100’s of millions world wide or around 200,000 in NZ.
Take that number out of the population and the housing market may look very different.

by Miguel | 12th Mar 20, 8:22am 1583954564

The thing to watch is unemployment. Not because people losing theirs jobs means they can't afford their mortgage payments (although this will happen). If unemployment rises notably the high levels of immigration can't be justified. Once immigration falls (or turns to emigration) it will lay bare how much of our GDP "growth" was artificially bolstered by just bringing in more people. In addition, reduced demand for housing will see additional downwards pressure on rents, house prices etc.

by Advisor | 12th Mar 20, 8:58am 1583956700

The saving grace there could be a rise in number of expat Kiwis returning as the job market in the UK and Australia turns sour.

That being said, Kiwis would likely return to our big cities while this economic sh*tstorm will hit the regions harder.

by Foreign buyer | 12th Mar 20, 3:35pm 1583980532

Any kiwis returning now we be on the next plane outa here. The high house prices make NZ a very unattractive place to be.

by Nzdan | 12th Mar 20, 6:57am 1583949451

It's always a good time to buy NZ property. What other investment class doubles every 7 years, completely thrashing inflation, to infinity? Forget corona virus, if you delay buying NZ property you clearly have morona virus.

DISCLAIMER: The comment contained herein is for general entertainment purposes only and is not intended to form professional advice

by CourtJester | 12th Mar 20, 9:01am 1583956916

Right? The Great Property Cycle will ensure that Auckland average reaches $2 million by 2024. 100% guaranteed to double your money in 4 years! Buy now! Buy! Please....!

by Nzdan | 12th Mar 20, 9:09am 1583957368

Property clock says so.

by VeryInterested | 12th Mar 20, 2:07pm 1583975252

Actually, Bitcoin is the biggest performer of all time.... didn’t know thus until this week! $zero to $7800..... and if you timed it well, zero to $18k.

by Sleepyinvestor | 12th Mar 20, 7:11am 1583950304

Cashed up and ready to buy once things settle!

by Carlos67 | 12th Mar 20, 7:25am 1583951120

Well that makes two of us but im still not sleeping well at night. Its all very well to have cash but not so great if the powers that be try and take control of it or highly influence the way you can spend it.

by Becnz | 12th Mar 20, 8:34am 1583955257

Me too just make sure your bank is safe. You can open Australia account and take advantage of the 250k per person per bank govt guarantee compared NZ which I think is nothing as goverement as per usual are not getting it done.

by Independent_Observer | 12th Mar 20, 10:26am 1583961994

Or if your children have a young family, both work and have a large mortgage and can't afford loss of income.

by Somebloke | 12th Mar 20, 8:08am 1583953723

Some folks are about to get a lesson in diversification.

by Averageman | 12th Mar 20, 8:12am 1583953933

Been coming for a while and let's face it, nothing has really happened in NZ housing yet accept very flat listings and sales volumes. When you look at the lack of investment grade numbers in NZ housing, it will be the banks and employment that really call the tune here. It could be a long way down to normal debt to income ratios. Would not want to be long on property based on the interest only capital growth model.

Def time to wait. Sit on that FHB deposit, or continue to pay down debt and or build vulture fund. Cash will be king again.

by CourtJester | 12th Mar 20, 9:04am 1583957098

I think I'll time my first home purchase based on Covid-19 vaccine mass production. I'd say 6 months after a mass produceable vaccine has appeared is a good time to get in.

by Becnz | 12th Mar 20, 8:28am 1583954906

Only buy now if you get a big fat discount to the RV and some more just in case.

by blowjoy | 12th Mar 20, 10:55am 1583963705

Anything comes with a big fat discount now can get a fat discount when things go further south.
I'd buy good properties with some safeguards, for example, with some decent land, which is becoming increasingly scarce.
If you followed the market from beginning of the year, for that kind of property, be prepared to pre auction offer, and 20% premium over CV.

by blowjoy | 12th Mar 20, 8:52am 1583956358

Not what I saw in the auction rooms, a month ago or yesterday.

by CourtJester | 12th Mar 20, 9:09am 1583957357

Let's talk about those people 12 months from now.

by Basil brush | 12th Mar 20, 9:56am 1583960176

What did you see yesterday in the auction rooms out of interest?

by blowjoy | 12th Mar 20, 10:48am 1583963324

Higher successful rate.10% over CV for central Auckland properties.

by Yvil | 12th Mar 20, 10:07pm 1584004074

I saw the same at Ray White

by stuart786786 | 12th Mar 20, 5:44pm 1583988268

Small businesses are losing money as no or little business and many people are afraid of losing jobs and in this scenario borrowing money is fearful though will NOW hear lot of noise from vested people/ media/ lobbying about right time to buy and prise only go up but one has to be carefully and if this continue housing market will be affected - How much, have to wait and watch.

Just now a so called experts on Breakfast show was saying that come what may house price keep going up so buy now - FHB have to watch out for such Propoganda trying to create FOMO. FHB should buy but not under narrative that has and will be created to avoid problem in future.

If this scenario/ crisis continues the way it is now in next few months will see the hit in housing as in stock market now though with not that severity but still as seen starting of last year.

by CourtJester | 12th Mar 20, 9:12am 1583957579

Oneroof's """""expert""""" panel has already told us that everything points to house prices going up up up in the near future, and the far, as the eye of the Church can see.
Stock market crash? Buy a house coz' everyone's gonna put their money in property! Banks should give out 100% LVR loans!

by Independent_Observer | 12th Mar 20, 10:29am 1583962149

Houses the new gold?

by CourtJester | 12th Mar 20, 10:46am 1583963195

I wonder how many people take out gigantic loans to buy gold...

by sadr001 | 12th Mar 20, 11:52am 1583967153

Leveraged investing in gold is an advanced investors game not really suited to jo average investor.

by CourtJester | 12th Mar 20, 12:42pm 1583970178

"advanced investors game" - also known as gambling.

by Averageman | 12th Mar 20, 5:35pm 1583987706

Once banks start taking losses, refusing to lend to each other etc, and businesses start trimming salarys banks have only one action to save themselves. Incease rates. What will low/yield housing speculation be at that point?

.....gambling.

by Seve | 15th Mar 20, 9:01am 1584216065

I'm old enough to remember 1987 black Monday crash and i knew a few people who had brought shares and used their homes and investment properties as collateral,the game then was to max your leverage (sounds familiar today ) ,they then had the hard word to repay their loans back ASAP and guess what had to sell their properties in a down market at well below the previous valuations ,i wonder how many people might be in this position.

by CN | 15th Mar 20, 11:04am 1584223462

I heard a story about a guy with wife and kids post 1987 crash. He was mortgaged to the hilt and leveraged in shares prior to 1987 crash due to greed. The guy lost everything financially and it took a toll on his mental health. He then committed suicide leaving behind his wife and children. Obviously, the loss took a mental toll on the wife and kids.

This story has stayed with me, and is the reason for highlighting potential financial risks for owner occupiers to consider when buying in property markets with price vulnerabilities. Owner occupiers should hear both sides before making a large financial decision, and not just the viewpoint of property promoters with their vested financial interests.

by CN | 15th Mar 20, 11:20am 1584224404

A reminder of some mathematics done last year.

Many property investors are extrapolating historical property price changes into the future. Historically prices have increased 9.9% per annum since 1965. Many property investors believe that prices will continue to double every 10 years. Is this price increase sustainable?
Let's assume that there is no hyperinflation in NZ, like Germany experienced in the 1930's, Zimbabwe experienced in 2000's, and the current situation in Venezuela. For hyperinflation to occur in New Zealand, would mean for the RBNZ to abandon it's 1-3% inflation target, and focus on different macro-economic metrics - that seems like a low probability scenario given the current environment & legislation in New Zealand.
So with a low inflation economic backdrop, let's assume property prices in Auckland double every 10 years (that means house prices grow at 7.2% per annum). Let's extrapolate what house prices have done in the past 52 years, and extend that into the future - what does the future look like for Auckland house prices?
(Here are some of the other underlying assumptions - rents in Auckland grow 5% per year, household incomes in Auckland grow 3% per year)
You can pick at which point that Auckland house prices might start to seem a little ridiculous to you.

In the year 2019 (today) -
Median house price in Auckland - $0.850mn
Median gross rental yields in Auckland 3.51%
Price to rent ratio 28.5x
Median house price to median household income ratio 8.9x (purchase cost for owner occupiers)
Equity deposit of 20% required (multiple of median annual gross household income to be saved as deposit): 1.8x
Equity deposit of 20% required to buy: $0.17mn
P&I mortgage pmt (@ 4% int rate, 30 years) as % of median household income: 41.3%
Median rent cost for renters as % of median household income 31.3%

In the year 2029 (10 years from today) -
Median house price in Auckland - $1.7mn
Median gross rental yields in Auckland 2.86%
Price to rent ratio 35.0x
Median house price to median household income ratio 13.3x (purchase cost for owner occupiers)
Equity deposit of 20% required (multiple of median annual gross household income to be saved as deposit): 2.7x
Equity deposit of 20% required to buy: $0.34mn
P&I mortgage pmt (@ 4% int rate, 30 years) as % of median household income: 61.5%
Median rent cost for renters as % of median household income 38.0%

In the year 2039 (20 years from today) -
Median house price in Auckland - $3.4mn
Median gross rental yields in Auckland 2.33%
Price to rent ratio 43.0x
Median house price to median household income ratio 19.8x (purchase cost for owner occupiers)
Equity deposit of 20% required (multiple of median annual gross household income to be saved as deposit): 4.0x
Equity deposit of 20% required to buy: $0.68mn
P&I mortgage pmt (@ 4% int rate, 30 years) as % of median household income: 91.5%
Median rent cost for renters as % of median household income 46.0%

In the year 2049 (30 years from today) -
Median house price in Auckland - $6.8mn
Median gross rental yields in Auckland 1.89%
Price to rent ratio 52.8x
Median house price to median household income ratio 29.4x (purchase cost for owner occupiers)
Equity deposit of 20% required (multiple of median annual gross household income to be saved as deposit): 5.9x
Equity deposit of 20% required to buy: $1.36mn
P&I mortgage pmt (@ 4% int rate, 30 years) as % of median household income: 136.2% (i.e have to pay more than entire median household income as mortgage payment)
Median rent cost for renters as % of median household income 55.8%

In the year 2059 (40 years from today) -
Median house price in Auckland - $13.6mn
Median gross rental yields in Auckland 1.54%
Price to rent ratio 64.8x
Median house price to median household income ratio 43.8x (purchase cost for owner occupiers)
Equity deposit of 20% required (multiple of median annual gross household income to be saved as deposit): 8.8x
Equity deposit of 20% required to buy: $2.7mn
P&I mortgage pmt (@ 4% int rate, 30 years) as % of median household income: 202.7% (i.e have to pay more than entire median household income as mortgage payment)
Median rent cost for renters as % of median household income 67.6%

In the year 2069 (50 years from today) -
Median house price in Auckland - $27.2mn
Median gross rental yields in Auckland 1.26%
Price to rent ratio 79.6x
Median house price to median household income ratio: 65.2x (purchase cost for owner occupiers)
Equity deposit of 20% required (multiple of median annual gross household income to be saved as deposit): 13.0x
Equity deposit of 20% required to buy: $5.4mn
P&I mortgage pmt (@ 4% int rate, 30 years) as % of median household income: 301.7% (i.e have to pay more than entire median household income as mortgage payment)
Median rent cost for renters as % of median household income: 82.0%

In the year 2079 (60 years from today) -
Median house price in Auckland - $54.4mn
Median gross rental yields in Auckland 1.02%
Price to rent ratio 97.7x
Median house price to median household income ratio 97.1x (purchase cost for owner occupiers)
Equity deposit of 20% required (multiple of median annual gross household income to be saved as deposit): 19.4x
Equity deposit of 20% required to buy: $10.88mn
P&I mortgage pmt (@ 4% int rate, 30 years) as % of median household income: 449.0% (i.e have to pay more than entire median household income as mortgage payment)
Median rent cost for renters as % of median household income 99.3%

In the year 2089 (70 years from today) -
Median house price in Auckland - $108.8mn
Median gross rental yields in Auckland 0.83%
Price to rent ratio 120.0x
Median house price to median household income ratio 144.4x (purchase cost for owner occupiers)
Equity deposit of 20% required (multiple of median annual gross household income to be saved as deposit): 28.9x
Equity deposit of 20% required to buy: $21.7mn
P&I mortgage pmt (@ 4% int rate, 30 years) as % of median household income: 668.2% (i.e have to pay more than entire median household income as mortgage payment)
Median rent cost for renters as % of median household income 120.4% (renters have to pay more than their entire household income to rent a house as accommodation)

In the year 2099 (80 years from today) -
Median house price in Auckland - $217.6mn
Median gross rental yields in Auckland 0.68%
Price to rent ratio 147.3x
Median house price to median household income ratio 215.0x (purchase cost for owner occupiers)
Equity deposit of 20% required (multiple of median annual gross household income to be saved as deposit): 43.0x
Equity deposit of 20% required to buy: $43.5mn
P&I mortgage pmt (@ 4% int rate, 30 years) as % of median household income: 994.5% (i.e have to pay more than entire median household income as mortgage payment)
Median rent cost for renters as % of median household income 145.9% (renters have to pay more than their entire household income to rent a house as accommodation)

In the year 2109 (90 years from today) -
Median house price in Auckland - $435.2mn
Median gross rental yields in Auckland 0.55%
Price to rent ratio 180.8x
Median house price to median household income ratio 319.9x (purchase cost for owner occupiers)
Equity deposit of 20% required (multiple of median annual gross household income to be saved as deposit): 64.0x
Equity deposit of 20% required to buy: $87.0mn
P&I mortgage pmt (@ 4% int rate, 30 years) as % of median household income: 1479.9% (i.e have to pay more than entire median household income as mortgage payment)
Median rent cost for renters as % of median household income 176.9% (renters have to pay more than their entire household income to rent a house as accommodation)

In the year 2119 (100 years from today) -
Median house price in Auckland - $870.4mn
Median gross rental yields in Auckland 0.45%
Price to rent ratio 222.0x
Median house price to median household income ratio 476.1x (purchase cost for owner occupiers)
Equity deposit of 20% required (multiple of median annual gross household income to be saved as deposit): 95.2x
Equity deposit of 20% required to buy: $174.1mn
P&I mortgage pmt (@ 4% int rate, 30 years) as % of median household income: 2202.4% (i.e have to pay more than entire median household income as mortgage payment)
Median rent cost for renters as % of median household income 214.4% (renters have to pay more than their entire household income to rent a house as accommodation)

by CN | 15th Mar 20, 11:13am 1584224011

Latest from Tony Alexander

https://i.stuff.co.nz/national/health/coronavirus/120149519/housing-mar…

by Brock Landers | 12th Mar 20, 12:05pm 1583967930

These people are snakes.

by CourtJester | 12th Mar 20, 12:45pm 1583970319

Snakes keep rodent populations in check, thus contribute some value to the system. These people on the other hand...

by Sibrit | 12th Mar 20, 1:07pm 1583971650

It's a challenge all right.

I'd planned to purchase a house early next year but my moderate KiwiSaver balance has dropped this year more than the contributions for this year, and I don't have any idea on whether it will recover in time.

So I'll either be left having to rent for another year (with the expectation that rents will go up), or settle for a lower priced house (which is becoming increasingly difficult given house prices are rising rapidly), or try and negotiate a less 20% deposit mortgage and pay the extra fees on top of that.

On the plus side, the bulk of my savings are still getting me 3% from the PIE TD's, and it's a good time to be investing in NZX50 while it's down, since this downturn should only be temporary.

by Carlos67 | 12th Mar 20, 1:26pm 1583972813

The "Downturn" has only just started and I don't know how long it will last be it will definitely not be temporary, unless you call 6 to 12 months just a glitch .Things are now at the point its going to get a lot worse before it gets better, its going to be hard pinning the trough on this one but it could get so bad it doesn't matter your quids in on the point of a 50% crash so start buying.

by Sibrit | 12th Mar 20, 3:12pm 1583979169

I guess the duration would depend on how much of this situation is driven by COVID-19 and how much by the oil spat between Russia and OPEC? Nothing else is really different between December last year and now. Or will it be a case of the recovery just taking longer even after the downward factors have been removed just because the market is in a more nervous state? I'm sure the NZX50 will recover, but will it be 5 years or 5 months? I would prefer the latter. Will probably know more after the financial results at the end of March.

by blobbles | 12th Mar 20, 11:34pm 1584009276

You are missing the multiple economic shocks that are likely to cause a financial crisis. At which point backs won't lend, interest rates shoot up, unemployment and inflation rise and it may wipe a lot of value from the housing market.

by Foreign buyer | 12th Mar 20, 3:32pm 1583980329

If you buy now or have bought in the last three years then you are about to lose at least 60% of your investment. This virus is not like anything we have seen before, coupled with an already severe economic downturn. We were warned. No excuses. Good luck!

by Averageman | 12th Mar 20, 5:21pm 1583986899

I'm in the "end the debt ponzi" camp but what do you base -60%?

by Yvil | 12th Mar 20, 10:12pm 1584004379

FB is not going to answer that, he has absolutely no idea, it's just a number plucked out of thin air

by lastlegs | 12th Mar 20, 5:01pm 1583985660

maybe a better predictor of the market would be if they kept the MP asset register up to date so we can see if they are selling any of the 350 houses they own or buying more.

by Nzdan | 12th Mar 20, 5:31pm 1583987471

I think two things are going to happen if not already happening:

1) people are going to pile into housing (FHBers) due to FOMO, uncertainty around Kiwisaver losses and general mayhem
2) those holding property (overseas owners/speculators in general) will seek to sell due to FONGO.

Result: FHBers catch falling knives.

by Keen Observer | 12th Mar 20, 9:08pm 1584000491

Just a temporary, as people a bit concentrated to stock pile hands sanitiser, toilet paper, come next April? all back in full swing up.Specially as Orr's team already signalling significant shock & awe downwards movement, for sure it's won't be up he said. The lower rate, will boost the RE production activity. The regional, take turns of country lock down cannot prevent the alluring force of certain country lower interest rates, means? Business..

by THE MAN 2 | 12th Mar 20, 10:35pm 1584005738

You can throw around no.s as much as you like but no one knows what is going to happen in the next few months.
Reality is that there will be plenty of losers out of what is going on no doubt.
The biggest losers are the ones who have taken notice of the ones that say to invest into the productive sector! Equities etc.
If you have shares and that includes investment in KiwiSaver with advisors there is no doubt that you are going to be suffering significant losses from a month or so ago!
Unfortunately this will have a flow on effect to most things and there will be a generation that will become the renting generation as they have been pinning their hopes on buying a first home with their KiwiSaver savings and balances are going to be significantly lower when the bottom is reached.
This is going to put further pressure on our rental stock and will ensure that rental prices will increase and tenants will need to stay renting longer.
I believe that with this happening it will firmly put people off investing in this so called productive sector and will encourage property investors to remain in the property business.
The share market once it bottoms out will not be seen at its peak level again for an extremely long period of time if ever!
As I have constantly stated, the share market is blatant gambling and positively geared property bought with upside can not be beaten for return and security!