Another economic indicator clicks into place for the 2017 election.
A net 26 percent of people say it is a bad time to buy a house, compared to a net 20 percent three months ago.
A reading of zero would indicate people are evenly split on whether or not it is a good time to buy.
ASB chief economist Nick Tuffley says buyer sentiment is the lowest it has been since the survey began in 1996.
Sentiment is weakest in Auckland, but the sharpest falls were registered in other regions. A net 33 percent of Aucklanders say it is a bad time to buy.
A net 26 percent of people across New Zealand think it is a bad time to buy.
Mr Tuffley says continued expectations of house price increases, and higher debt servicing costs, appear to have subdued sentiment around buying a house.
But the tightening of the Loan-To-Value-Ratio rules also appear to be playing a part.
“The fact that the 40 percent investor deposit requirement is having a proportionately larger impact on investors outside of Auckland could explain why sentiment dropped more in other regions this quarter,” he says.
Media are selling this as “doom”, but what it really means is that we’ve moved from a run-away market to a more sensible one. Prices aren’t going down, they are rising at a slower rate.
“However, first home buyers may remain cautious given recent house price appreciation, and they are also likely to be wary of perceived changes in borrowing costs. All up, high house prices and a higher deposit threshold for investors are likely to weigh on sentiment this year.”
Few respondents expect interest rates to fall. Overall, respondents expect interest rates to either remain steady or increase.
Mr Tuffley says “This is likely to be because the previous two Official Cash Rate (OCR) cuts were associated with little downward movement in mortgage rates.”
ASB economists expect the Reserve Bank will cut the OCR tomorrow to 1.75 percent.
“But due to funding issues, we don’t expect floating mortgage rates to move to the same extent. Term mortgage rates have started to creep up.”
Basically, the time of making a quick buck may be coming to an end, and a period of price stability may be ahead. National will rightfully be able to take some credit for cooling the market. Mind you, it’s still allowing people to stream into New Zealand and the best it can do is announce housing that will be complete in 2018 or later, but in general, it’s another stick that Labour won’t be able to beat the government with.