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

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. "

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Firstly, do your sums. Be honest about worse case scenarios, i.e. loss of an income, interest rate fluctuation, having some disposable left over to build some on hand cash reserves again for emergencies so you don't have to go back to the bank to re-mortgage.
Then stick to them. Because if you over-extend and get caught out you'll be the one left holding the can. Not the estate agent that talked you into your dream home straight up or talked a few more grand out of you than your budget was capped at, and not the bank manager that loaned you the money.

This sort of garbage ought not to be put on this site Bernard...these 'surveys' are just humbug.

agree, it's just a load of blah blah blah
these surveys have a poor track record of actually meaningfully predicting things 

On the contrary if you pair the questions it could be quite revealing.
Pity they didn't ask the question, what % pay rise do you expect in the next year, two years etc

Maybe young people are more optimistic because they have never before experienced a recession?

..or mortgage rates over 10%, redundancy or have fallen into Brownlee’s dirty laundry basket.

maybe, also maybe they are the children of baby boomers and have been strongly influenced by their parents' experiences of booming house prices and the "house prices always go up" mantra

This is really rubbish, what next.  What is wrong with Kiwis that they have so little imagination left that they need this housing price dribble daily.  There are more stories on average about NZ house prices than what is going on in the real economy.
When is the reconnection going to happen? There is nothing positive for NZ in house prices going up, we are already indebted up to our eyeballs and every house that sells at the current prices just adds to the problem we have to face as a country sooner or later.

Good on the young people.
Wonder what the average age of the miserable scared hand wringers on this site is - 87?

Truth be told , the 87 year olds aren't such a grumpy bunch ...... you'll be amazed by this , but scientific research and Roy Maudlin Surveys have shown that the " miserable scared hand wringers " on this site are exactly Bernard's age ..........
...... surprised me too , when I learned of this ......

Bernard must be 50 himself - which is still ancient from where I'm slouching.

Well don't  just sit there slouching S.K....I didn't get where I am today by wouldn't have done me any good slouching...why I rem...em..bla ..bla bla....

There is another possibility as regards the 24-35 year old group's confidence increase as  mentioned - could it possibly be that the vast majority in that group have no idea at all about the current realities of the world?? - this seems to me to be  highly likely given my recent experiences in  trying to discuss "economics" with a number  of younger adults  - NB:  it also bodes very poorly for our future if they continue to function on the" ignorance is bliss" formula which prevails...

Bernard - what has happened to the Top 10 at Ten these days  - ???

He's downsizing it, to the best 9 at 9.

He's thoroughly imbibed the French way of life , after his month's holiday there ...
... now only turns up for work late , and after having a carafe of vin ordinaire hu'pays  at Cafe' Rene's ......

All bets about an improving economic outlook for New Zealand over the next 6 months are off in my view. It’s just too close to call.
The Europeans are doing what the Europeans always do; screw themselves and everything else up. Lending growth by China's biggest banks was miserable to say the least last month, not a good sign of the strength and future direction of the Chinese economy. The leadership there is suffering from a degree of paralysis due to the impending change of the old guard for the new, and what appears to be a fierce battle behind the scenes being fought between reactionary communist forces and those who have a more progressive and capitalist vision for the future of China. The decline in the profitability of the mining sector in Australia as a result of the decline in Chinese and global demand for commodities, handsomely aided and abetted by the Labor Govt there too I might add, rolls dangerously on the event horizon of the long-drops dunny seat.  That country has the economic staggers, and it could take a turn for the worse. The sharp fall in oil prices also suggests a global cooling off in the economic outlook.
These are many of our major trading partners. Without their deep pockets and spending, we don’t make any money. Add to that our own sharp decline in commodity prices, less money coming into the economy, the fall in the $NZ potentially putting up fuel and other import prices, consumer and business confidence in New Zealand may take a sharp reversal as the economy cools this winter. It’s too close to call at this stage. But I don’t think the picture ahead is as positive as many may think it is given the rapidly changing international situation. And for the Malthusian nutcases, no that doesn’t mean NZ is about to plunge of the cliff into the economic abyss. Kapeesh?

yep and it was pretty obvious all this was coming despite all the spruiking the last couple of years
the best way NZ can rebound is for emergency legislation to be passed to free up planning controls and get building happening again. For better or worse NZ's past economic success has largely been based on booming construction, and this becomes even more important with the necessary slowdown in govt spending and weakening exports
but you can bet your life that the necessary urgency won't be forthcoming
Key and co will just sit on their laurels, unemployment will rise etc. and the whole situation will get in a worsening spiral
a circuit breaker is desperately needed

oh yeah and the tax cuts were a massive mistake (might have been OK if they had made some corresponding cuts to WFF, but of course they didn't)

The risk for young house buyers  is not interest rate rises (unlikely for the next 5 years), but rather job security.  Make sure you can survive on one wage for 6 months or so.
Forget about capital gain (or don't factor that in) just focus on end point repayment.