Economists predict house prices to rise a further 15% this year
House prices continue to skyrocket post-COVID-19 pandemic – and Kiwis expect them to shoot up in the next 12 months, according to the latest ASB Housing Confidence Survey.
A net 73% of the survey’s respondents expect house prices to continue rising in the next 12 months – the highest in the 25-year history of the survey and a significant increase on the previous 65% record high in July 2015. Their expectations align with economists’ predictions, with ASB senior economist Mike Jones predicting house prices will rise a further 15% this year.
“This is the strongest quarterly result we’ve seen and is perhaps not surprising given the way the market has been going. It’s an astonishingly quick return to confidence given, just six months ago, a net 9% of those surveyed felt house prices would drop,” Jones said.
Jones added that they also see a positive outlook for prices spread fairly evenly across the country, which is uncommon.
“However, as flagged in the previous survey, this is coming at a cost to homebuyer sentiment, which has fallen to a three-year low this quarter,” he continued.
Despite an increase in house price confidence, a solid employment market, and low mortgage rates, affordability is taking a toll, said Jones.
“Average house prices in New Zealand are now about eight times the average income. In Auckland, the ratio is closer to 10. Only three out of 92 major global housing markets currently have house price to income ratios north of 10,” he said.
“Over summer, houses sold at a pace and in numbers not seen in 15 years, and although sellers scrambled to get in on the action, supply is still not keeping pace with demand. Given this background, the only surprise here is that buyer sentiment isn’t even lower.”
He explained that the house price outlook for 2022 depends on how quickly the residential construction boom currently underway can restore some balance to the market.
“Our view is that rising supply and eventual modest increases in mortgage rates will pull annual house price inflation back down to single-digit levels in 2022. At this stage, we don’t expect outright declines in prices, but we do expect house price growth to slow down a little this year,” Jones concluded.
