"Thump. That's the sound of kiwis' house price expectations crashing back down to earth."
That was the the opening comment in ASB's report on the bank's latest Housing Confidence Survey.
"We'd openly fretted about house price overconfidence last year, but the abrupt turning of the housing cycle has put paid to all that," the report said.
The latest survey, taken over the three months from February to April this year, showed a net 11% of people expect house prices to keep rising, down from a net 49% in the previous three months.
"The surprise, if anything, is that they [expectations] didn't fall further," the report said.
"House prices have already fallen around 5% from their November peaks, and we reckon the slow leak of pressure out of the housing market has got at least another 12 months to run.
"Three big housing nasties - higher mortgage interest rates, tighter credit conditions and increased supply, are now all in play and look set to stick around."
Interestingly it was survey respondents in Auckland who are most likely to think house prices will keep rising, with a net 15% in the City of Sales believing house prices will keep rising, compared to 8% in the rest of the North Island, 11% in Canterbury, and 7% in the rest of the South Island.
Aucklanders also appear to be less likely to think that interest rates will continue to increase, although an overwhelming majority think they will do so.
A net 77% of Aucklanders think interest rates will increase, compared to 83% in the rest of the North Island, 80% in Canterbury and 82% in the rest of the South Island.
Overall, a net 81% of survey respondents though interest rates will keep rising, up from 77% in the previous three months.
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