Confidence in the housing market has slipped as rising interest rates, stubborn inflation, and expectations of flat prices weigh on sentiment.
ASB’s latest housing confidence report for the three months to April shows optimism has cooled, with a net 19% of respondents expecting house prices to rise over the next year, down from 30% in the previous survey.
ASB Bank senior economist Kim Mundy said global pressures, including the conflict in the Middle East and its impact on fuel prices, have reshaped expectations around inflation and interest rates.
“House price expectations have eased as rising fuel costs and inflation concerns flow through to higher interest rate expectations.”
Mundy said sentiment around buying a home has also softened, with just 20% of respondents now viewing it as a good time to purchase, down from 27% in the January survey.
The biggest shift in sentiment was in interest rate expectations, with 48% now forecasting rate increases compared with just 5% in the January survey who expected rates to keep falling.
Banks have been lifting fixed mortgage rates in recent months, pointing to higher wholesale funding costs driven in part by global pressures, including the conflict in the Middle East.
Mundy said overall sentiment has eased but remains relatively balanced, with most respondents expecting the housing market to stay steady rather than fall and house prices to be broadly flat over the year ahead.
The sharpest drop in house price expectations was in Auckland, where the share of respondents expecting prices to rise more than halved to a net 14%. Mundy said this pointed to the region being more sensitive to higher mortgage rates and fuel costs.
Canterbury stood out as the most upbeat region, with house price expectations largely unchanged and around 30% of respondents still expecting prices to rise.
Going forward, Mundy said expectations of higher inflation and interest rates are likely to continue weighing on housing demand in the near term, especially as cost-of-living pressures persist, with forecasts suggesting inflation could approach 5% this year.