Housing confidence plunges as fewer people think house prices will keep going up, more think interest rates will rise

Housing confidence plunges as fewer people think house prices will keep going up, more think interest rates will rise

Confidence in the housing market is plummeting with a record number of people believing it's a bad time to buy a house, according to the latest ASB Housing Confidence Survey.

Housing confidence is now at its lowest point since the survey began in 1996, especially in Auckland where a net 33% of respondents to the latest survey think it's a bad time time to buy a house.

That means those people who think it's a bad time to buy out number those who think it's a good time buy by a third.

Nationally a net 26% of people think it's a bad time to buy a house.

The survey also found that although housing confidence is lowest in Auckland, it is falling at a faster rate outside of Auckland.

It also found that fewer people are expecting house prices to keep rising, while more are expecting interest rates to rise.

Although 64% of respondents think house prices will keep rising, that is down from 68% in the last survey, taken in the second quarter of this year.

And 25% of respondents expect interest rates to rise in the coming year while only 18% expect them to fall, compared to 24% and 17% respectively in the last survey, while 32% expect them to remain the same and 25% don't know which way they could be headed.

"Over the last six months or so there there have been two OCR cuts but little movement in mortgage rates," ASB's economists said in the survey results.

"Bank funding dynamics have muddied the relationship between the OCR and short term interest rates.

"The lack of substantial interest rate falls could have respondents questioning whether interest rates will fall any further.

"We continue to expect the Reserve Bank to cut the OCR by 25 basis points on November 10, but due to funding issues, do not expect floating mortgage rates to move to the same extent.

"[Longer] term mortgage rates have started to creep up," they said.

Housing confidence

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The 'Good time to buy %' chart will be drawn here.
Source: ASB
The 'Expecting prices to rise %' chart will be drawn here.
Source: ASB

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That means those people who think it's a bad time to buy out number those who think it's a good time buy by a third.

But only 33% think it is a bad time to buy a house while 64% think prices will keep rising? The article doesn't give a figure for those who think it is a good time to buy.

Hey interest.co send a reporter down to Barfoots 1.30 auction today - they should get through the 27 auctions in less than an hour, no bids, passed in, etc - should be pretty quick.

One of us should go. I may be able to drop in.

Not confusing at all, more people now think it's a bad time to be buying a house, me included.

But does the article give a figure for those who think it is a good time? I am assuming it is around 20%. However if you thought prices were going to go up that would imply that it is a good time to buy and 64% said that.

Auckland, NET 33% think it's a bad time to buy. For example if 60% say bad time, 27% say good time, 13% say don't know, then 60%-27%=33% net think it's a bad time to buy

That means those people who think it's a bad time to buy out number those who think it's a good time (to) buy by a third.

Wouldn't your figures suggest that they outnumber them by more than double rather than by a third? More than twice as many people think it is a bad time than think it is a good time. I get that it is 33% of all respondents but still not absolutely clear to the layman without raw figures.
Also they don't use 'net' figures later in the article.
Still confused...although I did work until 2am last night so not surprising.

Net, people think it's a bad time to buy. But people think prices will still keep going up. ? And ?? It's an odd result really. But not one we should argue against- instead we should be trying to think through what it means. What's the answer. Dunno.

Yes indeed.
I'll take a punt and say people are confident in the economy and assume that rich immigrants are still coming, that NZ is a desirable location but the stakes are getting too high in the house buying game for the small player.

because kiwis know that house prices never correct for even a quarter in the land of the great white cloud
pity historical Stats don't back that up

When buying a house for your family, anticipated future gains via rising housing prices shouldn't be a consideration.

And who these days doesn't do that? That is how they all justify paying the interest on their loans and justify that "renting is just a waste of money". Capital Gains expectations is the very foundation of the borrowing argument, from financial institutions through to government policy!

Yes, capital gains expectation is the very foundation of the borrowing argument.
However, banks lending on the basis of prudent norms (DTI less than 4) would not be supportive of that driver.
The capital gains expectation is only realised if banks lend above "prudent norms": - it is a bet on the self-interest of the banking sector whose only fetter is "self regulation" to counter their huge incentives to lend more recklessly than their competitors.
Given the still lax regulation of bank lending, it remains a good bet.

Not always. I am mid 30s and mortgage free. I didn't buy at all for capital gains, rather I bought so that I could lower my costs and have a stable roof over my families heads.

As I have no mortgage I don't have to pay any weekly costs (i.e. Rent or Mortgage). It means I can save more, or work less - and it means my wife doesn't have to work.

I can stay in my house until the day I die, it doesn't matter to me what the market does. If anything, a crash would benefit me more as that would mean lower rates.

It would only mean lower rates if just your suburb crashed.
People generally try to buy in the best location that they can afford however that just happens to correspond with locations that are likely to increase in value.

Lower council rates?

Well most of the population live in cities like auckland, welly, chch, Hamilton, tauranga - all now near impossible to find anything positively geared. That means you subsidise the tenants. Any you only make money from house prices increasing.

Not yet the case in places like Palmy. My most recent buy this year is by far and way the lowest yielding I've bought to date - (6.8%) yet still puts $107 into my pocket a week after mortgage interest, rates, insurance.

I'm accepting the lower yield as able to stagger mortgage across a range of terms and still end up with a very low overall mortgage rate. The amount of debt internationally and nationally (think aucklanders stuck with best part of a mill in debt on an 'asset' they live in so something not bringing any income. .) acts as a dead weight preventing interest rates from ever going back to normal eg 7%. As rates move up (or even threaten to move up) you'll see a big reaction from markets and as in the case of the Fed, this has been enough to prevent any moves higher so far (4 were predicted this year, likely 1 at most, possible to see none)

And it's already up 30-60k depending on which valuer I get - going up at around 5% every 3 months at present.

"That means you subsidise the tenants." My observation has been that it is the tax-payer who subsidises the landlord, not the landlord who subsidises the tenant.

Only if the landlord makes a loss, and even then the refund is only at most about a third of that loss. They're still losing money and the tenants are living in a house for a weekly cost that is significantly LESS than what that same cost would be if they owned the house.

Crazy investment style if you ask me, especially when Auckland prices are already so high.

Rebalancing may very well be underway. Time will tell as in 3 months the market could go in one of three directions. Kiwi's have short memories, however this time I reckon the market will move sideways. We could be in for 10years of static prices. Much like the 90's.

I think it is called common sense. We all know there is no way house prices at the bottom/ mid end can keep going up unless a. There is wage inflation or b. Investors like pension funds, insurance funds buy up the market. The later are more likely to buy blocks of flats as they are easier to manage. Also now bonds/cash/ equities have fallen back from July highs they might see better investment opportunities in other asset classes.

c. If interest rates keep falling - there's an awful lot of people who only care about serviceability...

I can hear household wallets shutting all around the country. The housing ATM is now closed.

Can someone intelligent (If we have any left after following the USA election) remind me just why the Interest rates for borrowing money were forced down and down, over the past 8 years, since the GFC.

Are we not just following the trend. Stupidity reigns. Economic theory sucks. And I do believe ...we are the suckers. Skimmed, scammed, plus a life sentence on either side of the housing equation.

Our Poll-lies have just had a large pay rise, well large by today's standards.
Banks like wise.

Go figure..

Same in USA... same here...skim a little...scammed a lot.

IMO its because there are still people on this green (green, for now) earth that believe infinite growth is possible on a finite planet.

If wages aren't growing people cant afford to borrow more each year with medium interest rates, drop the rates and people have more room in their income to borrow -> keeps the growth going but hides the real problem.

Eventually you will hit a wall where interest rates cant go any lower and people appetite (or ability to service more debt) hits Zero, ie the music stops.

Im picking a bunch of the specuvestors will start hitting the exit and list houses in Auckland as the down side pressure becomes to much. Listings up recently if the thickness of the property press is anything to go by.

FHB will fence sit with the possibility of lower prices and less debt, specuvestors will become nervous with the decline in free capital appreciation and equity restrictions, yield focused investors are committing their equity to regional buying/debt leveraging because the numbers stack. Who will be buying them....?

Greg, could you please please please overlay an actual house price appreciation in % over your "Expecting prices to rise" graph for 1997 - 2016.
I would love to see the correlation between price rise expectation and actual price appreciation.

That would be great to see.

My favs are some graphs in Tony Alexanders newsletter a few weeks back that showed a strong correlation between days to sell and price rises. Eg days to sell shorten = prices rise fast. PN has been at 19, 21, 20 days to sell last few months, going at 5% per quarter, 20% pa gains, Auckland days to sell had been low 20s, now well over 30 days... the 2 speed housing market has swapped as Aucklands fully priced and now the money flows to the regions (Hamilton tauranga first, they're now near fully priced - next wellington, Palmy

Mortgage interest rates up, listings coming on at a rate that exceeds sales by more than two to one, Chinese activity dried up, 40% LVR market killer - doesn't look to positive out there for house prices. Flat or sharp decline ahead?

Ok ... so next step. Banks live from mortgages and lending money, but that will now reduce which means that their profits will reduce as they will 'create less money'.

So, what can they do to offset it - increase the interest. Even less people can buy (i'm talking about normal people that work and want to have just family home)....

Looks like big shift is starting...

I predict a shortage of fools soon

Big call that one!

Clearly things have quietened down in Auckland due to several factors at play.
Professional investors with good equity NZ wide will be buying if the numbers stack,up and the property looks undervalued.
True investors love,it when the market is flat,as the opportunities are there and tenants are always around providing you have a quality product.
Don't agree that it is prudent to have an unencumbered home as you are not utilising your equity to maximise income.