House price expectations plummeted in the first quarter of 2022 (Q1), amid increasing supply, higher mortgage rates and tight credit conditions.
The ASB Housing Confidence survey says only a net 11% of people expected house prices to continue increasing, down from a net 49 percent in the fourth of 2021 (Q4).
A net 81% of survey respondents expected interest rates to increase over the coming year, which was a 26-year high.
A net 20% of respondents said it was a bad time to buy a house, compared with a net 28% in Q4.
“We were concerned about house price overconfidence last year, but the abrupt turning of the housing cycle has put paid to all of that. If anything, we’re surprised sentiment hasn’t dropped further,” ASB senior economist Mike Jones said.
“House prices have already fallen around 5% from their November peaks and we think the slow leak of pressure out of the housing market has at least another 12 months to run.”
South Islanders, outside of Canterbury, were the most pessimistic about the housing market, with a net 7%, expecting prices to continue rising, while Cantabrians were more positive, experiencing the smallest fall in housing confidence.
“The bulk of the house price impact from mortgage rate increases is yet to come, with around 60% of all mortgages rates resetting over the coming 12 months,” Jones said.
“If our views are roughly correct, affordability should keep improving for at least the next 12 months as house prices pull back and wage growth accelerates.”