Prices have rebounded significantly from the COVID-19 pandemic
House price expectations are skyrocketing as the market bounces back from the impact of the COVID-19 pandemic, according to ASB’s latest report.
The latest ASB Housing Confidence Survey revealed that a net 67% of Kiwis expect house prices to continue rising over the coming year, the highest month in the 24-year history of the survey.
For the three months to October, a net 45% of the respondents said they expect house prices to continue rising, a jump from the net 9% expecting a fall in the second quarter of the year.
ASB senior economist Mike Jones commented: “After a brief dip during the lockdown, price expectations have spiked. This does raise the question: ‘Are we at risk of over-confidence?’
“Rightly or wrongly, these results suggest housing is increasingly being perceived as a ‘one-way bet’. It’s no wonder the RBNZ has heeded our call to bring LVR restrictions back in early. Their return next year and the roll-back of some other policy support promise to take a little heat out of what may otherwise have been a summer scorcher.”
Meanwhile, a net 29% of the respondents predict a further drop in interest rates – noting the continuous decline of retail interest rates this year even with the official cash rate (OCR) remaining at 0.25% since March.
“With the OCR at its ‘effective lower bound’, a raft of other measures has been used to lower interest rates. The latest of these, the RBNZ’s so-called Funding for Lending Programme comes in next month and promises to keep the downtrend in mortgage and term deposit rates intact,” Jones said.
“For example, we think one- and two-year mortgage rates will ultimately move closer to 2% than their current roughly 2.5% levels. That’s even without the RBNZ having to resort to negative interest rates, which we no longer see as likely. In other words, we see further support for house prices and housing confidence ahead.”
