Confidence in housing market takes a hit - survey
There has been a sharp drop in the number of people who think it is a good time to buy a house.
The ASB Housing Confidence Survey found a net 20 percent of people think it is a bad time to buy, compared to 3 percent in the previous quarter. It is the weakest sentiment since early 2012.
The net 20 percent is the difference between the 33 percent of respondents who think it is a bad time to buy and the 13 percent who think it is a good time to buy.
The survey also found that for the first time in over a year more people expect interest rates to go up, rather than down.
ASB chief economist Nick Tuffley says: "People appear to be wary of higher debt servicing costs on top of already-high house prices, which has pushed down sentiment."
The most noticeable change in sentiment has been in Auckland, where 32 percent now think it is a bad time to buy (compared to 20 percent in the previous quarter).
At the same time time, more people do expect prices to keep rising.
Nationally 68 percent of respondents expect higher prices over the next 12 months, compared to 59 percent last quarter. Only 7 percent believe prices are going to fall (8 percent three months ago).
A net 57 percent of Auckland respondents believe that house prices will continue to rise.
A net 66 percent of people in the rest of the North Island expect prices to rise in the next 12 months. In the South Island, 56 percent of respondents expect prices to lift.
ASB says it's the notion that all good things must come to an end that has prevailed in this quarterly survey.
Mr Tuffley says people are wary of higher debt servicing costs on top of already high house prices.
Sentiment could weaken further as the new loan-to-value restrictions come into force in November.
"Any investors eyeing up the market now have a bigger challenge to overcome in terms of a bigger deposit, and that may keep them pretty circumspect."
However, two things could change people's minds.
If the new loan-to-value restrictions imposed by the Reserve Bank slow both market activity and house price growth, then potential first-home buyers could look more favourably on the market.
A further cut to the official cash rate, already at a record low of 2 percent, could also flow through to lower mortgage rates, which might also stimulate the market again.