The housing market is expected to continue to run red hot, despite looming headwinds.
Housing in Mount Victoria, Wellington. Photo: RNZ / Dom Thomas
The July quarter ASB Housing Confidence survey indicates a net 59 percent of respondents expected house prices will continue to increase, even though a net 54 percent expected interest rates to also rise.
Price optimism remained strong despite ASB forecasting house price growth to drop to just 2 percent next year.
ASB chief economist Nick Tuffley said he was not surprised people were doubtful of a slowdown, particularly with housing demand still outstripping supply.
"Given the recent government changes and new regulations have so far only slightly impacted the market, it's understandable that Kiwis are sceptical about a slow-down, particularly as annual house price growth has most recently hit 30 percent," he said.
Unsurprisingly, he said perceptions of whether it was a good time to buy remained negative, with 20 percent saying it was a bad time to buy, down only slightly on last quarter's 21 percent.
"For many watching the runaway housing market, it may be hard to imagine ever seeing a decline. Despite this, there are a number of factors which are increasingly likely to put the brakes on."
The price optimism persisted despite the reintroduction of the Reserve Bank of New Zealand's (RBNZ) loan-to-value ratio (LVR) restrictions, government tax policies for property investors and some upward creep in mortgage rates, Tuffley said.
"Quite amazingly, Kiwis showed no real difference in price expectations for the quarter in question."
While house price expectations may be holding steady, interest rate rises were increasingly viewed as inevitable.
"It was very clear the RBNZ intended to lift the OCR (official cash rate) on August 18, but only held off because of the just-announced Covid community outbreak," he said, adding ASB was forecasting an OCR increase in October.
"The longer the lockdown in Auckland lasts, however, the more likely (the RBNZ) will continue to pause to assess how the longer-term picture has been changed (or not)."