ASB's Nick Tuffley
The results of the survey, which cover the three months to July 2020, are a marked turnaround from those recorded in the survey of the previous quarter.
For the three months to July, there was a clear positive swing towards those who thought it was a good time to buy, with a net 21% of respondents viewed things positively.
This was a sharp increase from the net 1% who viewed it as a bad time to buy in the previous three months to April.
ASB chief economist Nick Tuffley says that 21% net balance of “good times” is the strongest quarter since late 2012, when the housing boom back then was just getting started.
Sentiment has been night and day between the dark depths of level four lockdown in April and the relative lightness of May onwards, he says.
“Views on whether it was a good or bad time to buy a house swung sharply back into positive territory once level four lockdown was over.”
For those with job security, buying conditions have been made attractive by steadily falling interest rates, which means debt servicing costs are lower and more favourable compared to rents.
This situation also makes borrowing to invest in property more appealing – given the steady decline in term deposit rates.
Tuffley says muted house price growth and lower market expectations may mean people saw more opportunities and chances of finding a “bargain”.
“With New Zealanders ‘trapped’ within their own borders, it is also possible we see people suffering from cabin fever contemplate buying a second cabin in which to feel feverish.”
This is backed up by respondents’ views of price expectations, with a net 11% expecting prices to fall in the coming 12 months – down from net 14% expecting an increase in the previous quarter.
But the quarter was a wild ride when it came to price expectations, with the level four lockdown and the Covid-19 fallout impacting on Kiwis’ views on the outlook.
For the three months to July, price expectations were down overall, although this was heavily skewed by grim views during the deepest part of lockdown.
The survey shows price expectations plunged to a net 39% and 38% expecting price falls during surveying done over April and May, the depths of New Zealand’s lockdown.
As surveying proceeded, there was a clear lift in views and, by July, price expectations were on balance back in net positive territory, with 12% expecting increases.
Tuffley says that is still a long way shy of respondents’ outlook at the start of the year and no doubt reflects how the outlook has been changed by the Covid-19 pandemic.
But it does tie in with the shift back to a freer environment for personal actions, commerce – and real estate, he says.
“We were pleased to see how quickly the housing market bounced out of lockdown, though noted that there has been an element of pent-up demand to be satisfied.
“The second lockdown may also briefly curb people’s enthusiasm. Nevertheless, the results of our survey and the prospect of further mortgage rate falls, all point to the housing market remaining very resilient – despite the economic challenges that abound.”
Since Covid-19 hit, ASB has picked a 6% overall decline in New Zealand-wide house prices, but they now expect that the housing market will perform better than that, with a decline of around 3%.
The survey also shows that Covid-19 has turned interest rate expectations on their head, with a net 31% of respondents expecting mortgage rates to fall further over the next year.
Since July, economists at all the major banks have moved to forecast that the Reserve Bank will cut the OCR next year to a negative rate, Tuffley adds.
“The impact on mortgage rates will be for them to drop even further, although still be above zero. The public commentary about the prospect of even lower interest rates may show up in the next round of survey results.”