House price expectations plummeted in the first quarter of 2022 (Q1), amid increasing supply, higher mortgage rates and tight credit conditions.
Photo: RNZ / Alexander Robertson
The ASB Housing Confidence survey says only a net 11 percent of people expected house prices to continue increasing, down from a net 49 percent in the fourth of 2021 (Q4).
A net 81 percent of survey respondents expected interest rates to increase over the coming year, which was a 26-year high.
A net 20 percent of respondents said it was a bad time to buy a house, compared with a net 28 percent 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 percent 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 percent, 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 percent 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."