Auckland, Christchurch residents expecting 4.1% house price rises in next year; 18-24 yr olds expecting biggest increases, ANZ says

Auckland and Christchurch residents are expecting house prices in their cities to rise by an average 4.1% over the next two years, with 18-24 year-olds expecting the strongest lift, according to the latest quarterly ANZ-Roy Morgan consumer confidence survey

Meanwhile, 'grumpy growth' is still the agenda for New Zealand's economy as opportunities for expansion were countered by debt repayments, ANZ National chief economist Cameron Bagrie said. While businesses had been expecting consumers to start spending more, people had remained cautious, meaning a more restrained business environment.

ANZ's composite growth indicator, from its consumer and business confidence surveys, was pointing to GDP growth of 2.1% over the next year.

The latest quarterly ANZ-Roy Morgan Consumer Confidence measure was broadly unchanged at 113.9 in May. A marginal drop was recorded once seasonality was taken into account, Bagrie said.

The net balances for two of the five sub-segments that make up consumer confidence rose: views towards the economic picture 12 months ahead and the five year outlook.  Conversely, consumers still feel worse off, and more so (-8 versus -4) than last month.  Households still perceive it as being a good time to buy a major household item, though the net balance eased from +28 to +25.   

The survey's Current Conditions index posted a 3.5 point drop to 108.1 and the Future Conditions index rose 2 points to 117.7.  

"Stepping back from intramonthly noise the trend still looks once of modest improvement, though it is notable that current conditions – the key bellwether of tomorrow’s spending trends – remains subdued, and this indicates continued caution on the part of consumers," Bagrie said.

"We focus on a composite indicator that includes both business sentiment and consumer confidence.  Business sentiment indicators such as employment and investment intentions are timely barometers of pending momentum.  Yet recent lofty readings from business confidence surveys have tended to overstate reality, with a notable mismatch between expectations and outcomes," he said.

A key reason for this mismatch had been subdued consumer sentiment, which, as representative of the final purchaser, had flagged a more restrained environment for businesses (the sellers). 

"Our composite growth indicator – which comprises consumer confidence (current conditions) and indicators from the National Bank Business Outlook survey – is flagging 2.1 percent growth.  The consumer-business sentiment composite indicator is a better guide to economic prospects than each individual survey alone. The rate of growth flagged by our composite gauge remains subdued relatively to historical postrecovery experiences," Bagrie said.

"We continue to characterise the prospective growth trajectory for the economy as one of “grumpy growth”, symptomatic of the tensions between unlocking opportunities and paying penance for prior years’ borrow and spend excesses," he said.

On a gender split, consumer confidence was marginally stronger for males (up 1 point to a 10-month high of 121.1) and weaker among females (down 4 points to 109.8). 

Confidence lifted for all three age cohorts aged betwen 18 and 49 years of age.

"Encouragingly, confidence for the 24-35 year age group, which commands a sizeable chunk of disposable income spending, touched a new 22-month high in May," Bagrie said.

Wellingtonians posted a fourth monthly rise in sentiment, to sit at a 23-month high of 122.3. Confidence rebounded in Canterbury to take the second ranked position at 118.0, a 22-month high. Confidence in Auckland and the remainder of the South Island drifted to five and four month lows, respectively, he said.

The rise in Canterbury's confidence was driven by an improvement in the questions relating to the current conditions, while Wellington's lift was greatest regarding the questions related to the expectations of future conditions, Bagrie said.

"Respondents in Auckland and Canterbury expect the strongest lift in house prices over the next two years, both anticipating an average 4.1 percent increase for the next two years. The 18-24 age cohort expected the strongest lift in house prices.  

"Expected inflation 2 years ahead eased to 3.6 percent from 3.7 percent in the April survey. Regional and age group differences were evident, with the fall in inflation driven by the 14-18 age group and by regions outside of Auckland. "