Sentiment falls to seven-year low

A net 11% of all respondents nationwide see now as a bad time to buy a house.

A result of 0% would indicate an even split between those who think now is a bad time to buy and those who think it is a good time.

The sentiment is even more pronounced in Auckland. In the biggest city, a net 21% think it is a bad time to buy a house, compared to 10% in April.

ASB chief economist Nick Tuffley said: “Auckland continues to record stronger house price gains than anywhere else in the country while a lack of housing supply is likely causing frustration for buyers in both Auckland and Canterbury.”

But New Zealanders still expect prices to continue to rise. A net 40% said they expected house prices to increase.

“Again, this is evident in Auckland and Canterbury, where demand is the hottest and where other housing pressure points such as increased migration come into play. However, outside of these two centres, house price expectations are elevated when compared to the relatively modest gain in actual prices,” Tuffley said.

A lack of supply was a big factor affecting both price expectations and sentiment, he said.

“There are a low number of houses for sale nationwide.  Supply will lift gradually as construction picks up, but this process will take time. Throw into the mix the good performance of the economy, and we see no immediate driver for house prices to fall or interest rates to come down in the near future. Consequently, we feel that affordability issues are likely to impact housing market sentiment for the next year or two," Tuffley said.

A net 69% of respondents expect more interest rate increases. Tuffley said: "We agree with the majority of respondents who expect interest rates to continue to rise, however we are expecting the RBNZ to hold off raising the OCR again until early 2015.  We anticipate the RBNZ will lift the OCR to 4.5% over 2015, a further 1% above current levels, which would result in further mortgage rate increase for borrowers.”"