Housing sentiment slips as ASB's latest survey shows rate expectations at a three-year high
New Zealand's housing market is entering a more cautious phase, with ASB's latest Housing Confidence Survey showing buyers increasingly braced for further interest rate rises even as house price optimism continues to fade.
Still seen as a buyers' market
Despite mounting rate pressure, buying sentiment has held firm, with a net 20% of respondents still saying now is a good time to purchase — unchanged from the previous quarter and consistent with positive sentiment stretching back to late 2024. ASB attributes this resilience largely to "availability of choice," with housing inventory edging higher as sales activity slows to a two-year low.
House price optimism fades from summer highs
Net expectations for house price growth dropped to just 9% in the three months to July, down sharply from a summer peak of 30% in January. That's the weakest reading since mid-2023, though ASB describes current sentiment as consistent with a "relatively balanced" market where prices are largely moving sideways rather than falling outright.
Regional divergence remains stark: Auckland and the rest of the North Island posted net expectations of just 4% and 6% respectively, while Canterbury and the rest of the South Island sat well higher at 23% and 18%.
That cooling sentiment is already showing up in actual sales data: QV's House Price Index recorded a 1.5% national fall in the three months to July, with the average home now worth $898,799 — down 1.2% on a year ago.
Rate expectations climb to three-year high
The survey, covering the three months to July, found a net 57% of respondents now expect interest rates to rise over the coming year, up from net 48% in the previous quarter and the highest reading since April 2023. Only 5% expect rates to fall, while 62% believe borrowing costs will be higher in a year's time.
That shift follows the Reserve Bank's decision to begin lifting the official cash rate in early July, ending a lengthy period of rate cuts. ASB expects the central bank to keep tightening at each remaining meeting this year, forecasting the OCR will reach 3.25% by December — though ASB notes it sees "risks skewed to a more gradual pace" and flags the RBNZ could pause "particularly if domestic demand indicators remain sluggish."
That trajectory looks likely to continue: economists widely expect the Reserve Bank to deliver a second consecutive hike, taking the OCR to 2.75% at its 2 September meeting — broadly in line with the path ASB has forecast. Fixed mortgage rates have already been climbing in anticipation, with the two-year rate up 41 basis points and the one-year rate up 21 basis points since January.
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