20 Feb 2018

Property sector takes price, confidence hit

12:29 pm on 20 February 2018

The property market slowdown has taken its toll on confidence in the sector and the outlook for prices.

An auction sign outside a house for sale in Auckland.

Photo: RNZ / Claire Eastham-Farrelly

ASB Bank's quarterly survey of housing confidence shows sentiment was mixed, with fewer people expecting house prices to rise but more thinking it was a good time to buy.

A net 16 percent said they expected prices to rise in the coming year, the lowest level in six and a half years. That compared with 17 percent in the previous survey in October, and 32 percent a year ago.

The number who thought it was a bad time to buy a house also dropped. A net 7 percent said it was not a good time to buy a house compared with 11 percent pessimism level in October.

ASB chief economist Nick Tuffley said the mixed result was partly driven by Auckland's softer house prices.

"Price expectations have fallen to an eight-year low in Auckland as we continue to see the Reserve Bank of New Zealand's speed limits taking effect."

The number of Aucklanders thinking it was a good time to buy a house was at the highest level in five years.

Mr Tuffley said there was a clear geographic divide in sentiment.

South Islanders were more positive about the outlook for prices, while price expectations continued to ease in the North Island.

Expectations of interest rate rises also decreased, with just a third expecting higher rates in the latest survey from just over a third in the previous survey. The Reserve Bank of New Zealand this month indicated it expected to hold to official cash rate at least until late 2019.

Several retail banks have recently cut their short term fixed rate loans because of the prospect of no RBNZ rate rises in the foreseeable future.

Mr Tuffley said upcoming housing policy changes might weigh on sentiment.

"There is a degree of uncertainty around the potential impact of policy changes so investors and home owners are likely to remain cautious and not rush into any major decisions," he said.

"The market will continue to be constrained by population growth and low housing supply for some time."

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