ASB survey shows shift in market expectations for the first time in years
For the first time in over three years, a greater number of homebuyers anticipate a decrease in interest rates rather than an increase, according to the latest ASB Housing Confidence Survey.
"This may be a touch premature in our view but shouldn’t be ignored because interest rate sentiment can be an important driver of demand,” ASB senior economist Kim Mundy said.
House price expectations have also softened, with a net 44% of respondents expecting higher house prices, down from 51% last quarter. Despite this decline, the majority still foresee price increases. The survey reveals regional variations, with the South Island (excluding Canterbury) showing the highest optimism, where a net 48% expect price gains. In contrast, Canterbury and the North Island (excluding Auckland) have a net 43% expecting higher prices.
Nearly 90% of those surveyed expect house prices to be either flat or higher, aligning with ASB's forecast of approximately 1% year-on-year growth for 2024. Mundy explains that recent trends are consistent with their house price forecasts.
The survey identifies high mortgage rates and an increased supply of houses as key factors impacting house price growth. Elevated new listings have pushed the market supply to around ten-year highs, while affordability remains constrained due to high mortgage rates.
In a notable shift, more respondents now predict a fall in interest rates, with a net 1% expecting a decrease compared to 15% in January 2024. Mundy points out that while the broader economic outlook, including slow economic growth and rising unemployment, may dampen housing demand, the belief in falling interest rates could boost market activity.
Regarding the current buying climate, ASB noted there is little change. A net 2% of respondents believe it is a good time to buy a house, with 55% undecided. Regional disparities persist, with Auckland respondents being the most optimistic (net 5%), while those in the South Island predominantly view it as a bad time to buy.
High inventory levels may benefit buyers looking for a first home or investment property. However, those needing to sell their existing home to purchase a new one might face challenges due to high market supply and uncertain selling timelines.
