Confidence in rising house prices hits the highest level in three years…
…knocking back perceptions of whether it’s a good time to buy.
Expectations on whether interest rates would fall again were dialled back. But recent events suggest lower rates are on the way once again.
House price expectations rose over the three months to January 2020, for the third straight quarter. Expectations are now well above “average” levels, as house price expectations in Auckland have caught up to the already lofty levels prevailing in the rest of the country. Alongside rising house price expectations, it appears housing affordability has taken a knock. The trend improvement in house-buying sentiment of the past few years was brought to a halt in Q4. A net 9% of respondents now say it is a good time to buy a house, down from a net 13% last quarter.
Respondents’ interest rate expectations have been wrong-footed several times over the past year thanks to volatility in the global and local economies and some mixed signals from the RBNZ. Respondents adopted a “neutral” bias in the three months to January with a net 0% expecting rates to rise, a big increase from the net 31% of respondents expecting rates to fall in Q3. Of course, expectations look set to be whip-sawed again next quarter following the outbreak of the coronavirus and increasingly synchronous response by the world’s monetary authorities. We now expect the RBNZ to lower interest rates in both the March and May meetings, and would not rule out a large 50bps cut at some stage. Read the full report