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When coronavirus caution fades, expect buyers back in property market 'boots and all', ASB says

New Zealanders were feeling sharply more confident that house prices were going to continue to rise before coronavirus hit, research shows.

ASB has released its latest housing confidence survey covering the three months to January, which shows that 54 per cent of New Zealanders believed that house prices would increase over the coming year. That was up from 27 per cent in the previous quarter.

The recovery in Auckland confidence was even sharper, from 11 per cent to 42 per cent from one quarter to the next.

New Zealand’s house price growth was running at a rate of 7 per cent year-on-year in January.

As the COVID-19 coronavirus continues to spread around the globe, market analyst Josh Mahony says a recession in Italy and Japan is extremely likely, as well as economic disruption on an international level. 

There was no expectation that interest rates would increase and only 9 per cent felt it was a good time to buy a house.

“The continued lift in house price expectations is very much consistent with our own reading of the New Zealand housing market tea leaves. And, the lift in Auckland house price expectations has been pretty spectacular in a short space of time.  Housing demand is running hot on the back of the large falls in mortgage rates we’ve seen over the past year, and the cancellation of the capital gains tax in April,” Tuffley said.

“At the same time, the supply of new listings to market has remained fairly anaemic. House prices are squeezing higher as a result.”

But Tuffley said coronavirus, which has become an increasing concern through February and March, would have had an effect on the sentiments expressed in the survey.

He said the outbreak should lead to lower interest rates through this year, which would help the housing market.

But he said changing consumer behaviour could  lead to a softening in prices.

More than half of New Zealanders believed that house prices would increase over the coming year.
More than half of New Zealanders believed that house prices would increase over the coming year.

Overseas, people were moving away from offering open homes on properties, he said. “That’s not to say it won’t be sold in different ways.”

If there was a lockdown as was seen in Italy, that could stall the market for a period.

Tuffley said he still expected the housing market to pick up again later in the year and leading into 2021.

“At the moment we see this as short-term… as soon as the caution fades I expect we’ll see people back in boots and all.”

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