ASB survey shows declining housing confidence

Property

Housing confidence is waning, especially in Auckland, according to ASB's latest Housing Confidence Survey

27th Jan 16, 5:03am by Greg Ninness

Fewer people expect house prices to rise this year and more think it's a bad time to buy, according to ASB's latest quarterly Housing Confidence Survey.

The survey found 54% of respondents expect house prices will increase while 10% expect them to fall, another 20% expect them to stay the same and 16% don't know.

While that showed optimists still outnumber pessimists on house prices, the number of optimists has declined since the previous survey, when 59% thought prices would keep rising and 7% thought they would fall.

ASB said the decline in house price expectations was most evident in Auckland since the introduction of a suite of tax and Reserve Bank lending restrictions, which had moderated sales activity and price growth in the region.

"This is likely weighing on the survey results," the report said.

"House price expectations are likely to remain subdued in Auckland until the extent of the impact of last year's new housing measures are better known."

But when it comes to deciding if it is a good or bad time to buy a house, a majority are at best ambivalent on the subject.

The survey found only 16% of respondents thought it was a good time to buy, while 21% say it's a bad time, 46% thought it was neither good nor bad and 18% didn't know one way or the other.

There was a decline in the number of people expecting interest rates to fall, with more people expecting them to remain the same.

Eighteen per cent of survey respondents expected interest rates to rise, 24% expected them to fall, 30% expected them to stay the same and 28% didn't know.

"More respondents are expecting interest rates to stay the same, perhaps because they don't think they can drop much lower," ASB chief economist Nick Tuffley said.

"We expect the Reserve Bank to cut the OCR by an additional 50 basis points over 2016," he said.

"We may see more people expecting low interest rates as we get further into 2016."

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Source: ASB

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39 Comments

by Randomman | 27th Jan 16, 9:47am 1453841255

As a FH Tryer I'm reluctant to get into the Ak market at this point. If prices fell back to 2014 levels, (before the the loonies took over the asylum) I would be a lot more comfortable taking on the risk. .,

by skudiv | 27th Jan 16, 1:01pm 1453852891

Really, you would buy an overpriced asset that is falling in value? I wonder how many people, who are saying that now, would change thier tune if such a scenario were actually to happen?

by Randomman | 27th Jan 16, 7:02pm 1453874520

NoI am prepared to pay fair value but not the premium that iconoclast mentions below. Been to two auctions, first one stopped at our 'affordable' limit then watched two investors blow it out to a premium level, no accounting for the do up that it needed. second one was passed in with the vendor asking 90k above offers . As an owner/occupier I wouldn't be to concerned with a drop in price as looking long term to put a roof over the family.
.

by macbet | 28th Jan 16, 4:23pm 1453951389

Keep an eye on it. One figure you won't see reported much is REINZ stratified index - commonly held as the most accurate measure of what is going on in the market. Auckland housing is down 6% in last three months, 1.8% if you smooth it over three months.

You hear that nervous sellers are sitting it out until the "Chinese come back in February" - they won't. The next three months will clarify things and provide more solid data but in my neighbourhood (eastern suburbs) it is a buyers market and things aren't moving.

You still need a home of course, but if this continues you will at least enjoy the buying process and agents will be sending you flowers! Personally I think Aucks / Sydney / Melbourne etc are all going to reset to something more sensible, maybe down 20%, just not sure how long it will take.

by Penguin | 27th Jan 16, 10:03am 1453842206

I have just been reading on Bloomberg how top end property in California that this time last year was being bought by the Chinese is now back on the market with no buyers in sight. Evidence is growing that top end house prices globally are starting to fall so caution is the word.

by Andrewj | 27th Jan 16, 10:13am 1453842838

I have a friend in the Bay area who was developing high end property, 6 to 10 mill jobs, all being sold to Asian buyers, he loved them, then the suddenly stopped, partly due to tax complications.

by doublegz | 27th Jan 16, 10:23am 1453843402

This was sold for $3.74m in Oct last year, and now in the market again, quoting it's a 'surplus'.
http://www.trademe.co.nz/Browse/Listing.aspx?id=1018474109

Would you pay more than that now to buy it? Also to get to the double garage at the back, you need to share the driveway with your neighbour. The 560 sqm land actually includes the shared driveway which takes up 135 sqm...so really, it's less than 425 sqm for your exclusive use. It's hard to imagine for that price!

by cmat | 27th Jan 16, 10:34am 1453844092

I find it incredible that Aucklanders have the gall to bitch about rates and how prevalent it was in the news cycle.

$4,000 of rates on a house worth $4m. "Boo hoo, my rates are a full 0.1% of my property's value" - Suck it up, that's nothing!
I pay $2,500 on a house worth $450k in Wellington!

Len might be fiscally irresponsible but, by comparison, Celia is a fiscal menace.

by doublegz | 27th Jan 16, 10:33am 1453844009

Not sure where you got the rates info from cmat. If your CV is $4m then the rates is around $10,500 per annum. On the council website the address still shows the old CV of 1.34m when it was a plaster house. It was bulldozed a couple of years ago for the new build. Obviously they're still having issues putting up a new CV, probably due to the shared driveway dispute.

by cmat | 27th Jan 16, 10:33am 1453844030

States it in the TradeMe ad that Doublegz linked to in his post (above)

"Rates: $4,031.22 (GST inclusive)"

by doublegz | 27th Jan 16, 10:37am 1453844265

That's misleading information, as it is based on the old CV.

by xelnaga | 27th Jan 16, 10:32am 1453843967

Its a lovely little box. Worth 3.74m, no way.

by njm | 27th Jan 16, 5:07pm 1453867628

Quite right! look what you get in California for the same price

http://www.bloomberg.com/news/articles/2016-01-26/at-3-68-million-this-…

6404 square feet, 6 bedrooms, 6 bathrooms, lot size 35,251 square feet etc.

by ex agent | 27th Jan 16, 12:02pm 1453849365

The neighbours look so close they probably can see what you are eating for dinner. $3.74 million? I don't think so.

by iconoclast | 27th Jan 16, 12:28pm 1453850880

Auction 11 February 2016
Can you let us know how the auction goes - be interesting to revisit these comments in February

by doublegz | 29th Jan 16, 12:54pm 1454025296

Saw a group of Chinese buyers viewing when I drove past yesterday.

by Crazy Horse | 27th Jan 16, 10:41am 1453844467

Time to realise these ridiculous gains in Awklund and sell....sooner rather than later.

by iconoclast | 27th Jan 16, 10:50am 1453845007

When the market for a particular asset class becomes heated the prices achieved begin to rise, producing what is known as a "premium" to standard values that will be obtained during normal times. As competition for the asset increases, it is the the premium that increases rather than what would be considered the "value"

As the market cools, the first thing to retreat is the premium.- it goes "poof" - very quickly
As the market returns to nornal, the premiums disappear and prices revert back to real value

Conversely if the market struggles and demand evaporates, what was once a premium turns into a discount below value

Now the market appears to be cooling one should expect to see those premiums contracting

High end houses tend to have the highest premiums and the highest debt and the highest leverage so it is quite probable that the greatest movement will be at the top end as premiums become discounts

by CJ099 | 27th Jan 16, 11:16am 1453846587

Yes I agree about your premium theory, though there is another huge factor that you have to conside and that is one of your major property investors has pull out or at least had their tap turned off (Since last October). And this isn't just affecting Auckland and NZ but has an impact on the rest of the world.

And that investment mainly came from Asia or to narrow it down a little more China/Hong Kong. Since there have been lots of tax changes both here in NZ and in China to dramatically reduce overseas investment, that is going to have a HUGE impact on NZ and in particular Auckland's house prices. Considering that the market in Auckland has been bloated in the last few year by investors. Btw not sure if you noticed but one markets start to wobble one of the first things the banks but a stop to is overseas investment as they try to retain capital.
This may also explain why some of the larger European banks are pulling out of Asia at the moment, here's an example: http://www.bbc.com/news/business-35369821

Given that, I would seriously ask yourself is it worth paying a bolted house price or is it wiser to wait for them to fall given the current climate? I think the housing market is going to drop possibly by 20%

by sharetrader | 27th Jan 16, 11:56am 1453848973

no no no house prices never drop in NZ so i am told daily,

by Snodgrass Thro… | 27th Jan 16, 12:04pm 1453849497

Who tells you that sharetrader? Everyone I know is totally aware that prices fall some years and most could tell you which the down years were going back decades.

by sharetrader | 27th Jan 16, 5:07pm 1453867639

LOL i agree with you and show them periods when our house prices went backwards and even examples and try to let them know that all markets have bull and bear periods but they think i am crazy as the MSM has been prattling on about red hot house prices for the last few years and they believe all they hear.

by Snodgrass Thro… | 27th Jan 16, 12:05pm 1453849553

Who tells you that sharetrader? Everyone I know is totally aware that prices fall some years and most could tell you which the down years were going back decades.

by iconoclast | 27th Jan 16, 12:29pm 1453850957

From my perspective Asian Money WAS the premium

by NJH | 27th Jan 16, 4:51pm 1453866719

Could you explain the tax changes that happened in NZ and China to reduce overseas investments?

by sharetrader | 27th Jan 16, 5:09pm 1453867753

it was two fold need a IRD number (details which can be passed back to china) and China clamping down on capital flight

by iconoclast | 27th Jan 16, 5:17pm 1453868236

It was well publicised
"off-shore persons" buying NZ property have to get a NZ IRD number as well as a NZ bank account, and disclose their tax-identification-number from their own country
http://www.accounted4.co.nz/blog/post/4825/Big-Changes-for-Property-Tax…

by Penguin | 27th Jan 16, 11:50am 1453848622

This time last year 40% of AKL properties were being purchased by people of Chinese origin. Now they can't move money outside China via the junkets in Macau and other routes and so when you lose up to 40% of the demand overnight in any commodity then prices are almost certain to go one way.
There will always remain bulls in the market but I for one would not want to be over leveraged at this point in the property cycle.

by Joe Public | 27th Jan 16, 12:12pm 1453849933

Put on your crash helmets

by steven | 27th Jan 16, 2:10pm 1453857028

hmmm maybe diapers?

by CJ099 | 27th Jan 16, 1:27pm 1453854443

Yes even in the UK property market a few years ago, people felt that house prices could never drop but as soon as the credit crunch hit, it dropped. And the evidence is already there for NZ. Real Estate Agents don't suddenly switch from a lucrative auction listing to priced property over night unless demand has dropped so significantly that there's no alternative.

If you are thinking of purchasing a property now is the time to put in a 'Cheeky offer' either at the CV price or lower - force the market to drop, it has too!

by notaneconomist | 27th Jan 16, 2:19pm 1453857574

You would have to wait for the agents to get a little more hungry than what they are......the cheeky offers work better when they are struggling to pay their phone bills.

by ian64 | 27th Jan 16, 1:46pm 1453855611

I see interest rates at 1.5-2 in near future, just to keep the bubble rolling.

by ian64 | 27th Jan 16, 1:48pm 1453855686

I see interest rates at 1.5-2 in near future, just to keep the bubble rolling.

by steven | 27th Jan 16, 2:09pm 1453856988

OCR? The problem is who will bother to lend to us at that rate for the risk? I would not, not unless its kangaroo capitalism and I was guaranteed no loss....

by rastus1 | 27th Jan 16, 2:39pm 1453858756

...seems consensus is starting to build (and not just on this site) that Auck ppty growth has either stalled or even going backwards. The closer regions (Tauranga/Tron) still posisbly lifting....the question i'm pondering is will these regions hold, or follow Auckland, albeit with a time delay? I'm of a view Auck is so significant they will have to follow......thoughts anyone??

by fat pat | 27th Jan 16, 6:43pm 1453873382

Tauranga will go up big time!

by Realtor in France | 27th Jan 16, 7:12pm 1453875171

Well I read these or similar comments each year and to be quite frank it's all a bit hohum. Sure the market is perhaps over cooked but nobody holds guns to the borrowers head, supply and demand, and might I say 'greed' will prevail, so, just let the market talk. Next...

by Andrewj | 27th Jan 16, 7:19pm 1453875544

The problem is in the Euro Swaps, liquidity is going to dry up, in a big way.

http://www.alhambrapartners.com/2016/01/26/the-implications-of-federal-…