NZ households bracing for borrowing costs to rise
Confidence in New Zealand’s housing market softened this quarter as rising interest rate expectations and global uncertainty weigh on house price sentiment, according to ASB Bank’s latest Housing Confidence Survey for May 2026.
The quarterly survey, which drew 2,942 respondents from February to April 2026, found a net 19% of households expected house prices to rise over the next 12 months, down from a net 30% in the previous survey. Buying sentiment also eased to a net 20%, from a net 27% in the prior period.
Interest rates drive the shift
ASB senior economist Kim Mundy attributed the change in mood largely to global developments, particularly a fuel crisis linked to conflict in the Middle East.
“House price expectations have eased as rising fuel costs and inflation concerns flow through to higher interest rate expectations,” Mundy said.
The shift in rate expectations has been sharp. A net 48% of respondents now expect interest rates to rise over the next 12 months – a dramatic reversal from a year earlier, when a net 48% expected rates to fall. The survey report noted that 74% of respondents now believe mortgage rates have already bottomed for this cycle, with 55% expecting rates to rise further.
ASB economists forecast inflation will climb above 4% in 2026, driven by higher food and fuel prices following the closure of the Strait of Hormuz. The bank expects the Reserve Bank of New Zealand to begin lifting the Official Cash Rate in July, taking it to 3.25% by the end of the year from its current low of 2.25%.
“With interest rates likely to rise from here, we expect to see households willing to lock in mortgage rates and for housing market activity to remain relatively subdued in the near term,” Mundy said.
Regional divides emerge
Regional differences were a notable feature of this quarter’s results. Auckland recorded the largest decline in house price expectations, falling 19 percentage points to a net 14%, with the survey report suggesting the city may be more sensitive to higher mortgage rates or fuel costs given longer commutes and greater leverage.
Canterbury, by contrast, held relatively firm, with house price expectations at a net 30%. However, buying sentiment in the region weakened, with only a net 7% viewing it as a good time to purchase – the weakest reading nationally.
Supply cushions buyer sentiment
Despite rising cost-of-living pressures, buying sentiment held up partly due to an abundant supply of homes on the market.
“While higher interest rates and the rising cost of living pressures are expected to weigh on demand, abundant housing supply is continuing to support buyer interest, giving purchasers more choice, flexibility, and time to make decisions,” Mundy said.
The median number of days to sell remained around 45-47 days on a seasonally adjusted basis, while total listings continued trending higher, pointing to a persistent supply overhang in the market.
