Kiwis say housing overvalued, but still expect prices to ramp up 21%

Newly released BNZ Financial Futures Research has found 62 per cent New Zealanders think house prices in their region are overvalued, but, paradoxically, they also seem to be banking on overzealous price increases in the next year.

New Zealanders expect house prices to increase by a whopping 21 per cent during the next year, despite the national median house price increasing 12.7 per cent between October 2015 and October 2016 (REINZ).

Non-property owners have even higher expectations, forecasting house prices will increase 25 per cent during the next year.

People expect house prices will increase an average of 43 per cent in the next decade, and an average of 56 per cent  during the next 20 years.

David Bullock, BNZ’s acting director of retail and marketing, says it’s important that Kiwis don’t have unrealistic expectations of continuous house price increases.

“When it comes to rising house prices, people are very optimistic if they are banking on continuous price hikes well above average. It’s unlikely that housing will increase in value by as much as 21 per cent in the next year and nor would this be a good outcome for New Zealand. It’s also concerning if New Zealanders are planning their financial futures based on these sorts of predictions.

“It’s worth pointing out that rising house prices only make homeowners wealthy on paper. If you are selling and buying in the same market, then large profits are unlikely unless downsizing or significantly changing location” says Mr Bullock.

At the same time as expecting huge increases in their house values, New Zealanders also think that we’re paying too much for housing right now. This concept was pervasive throughout the country – even in regions like the West Coast and Wellington, more than half of people (57% and 59% respectively) think the market is overheated.

 “Our research also found only one in three (36%) think it’s a good time for people to buy their first house. Yet more than three quarters of people think it’s a good time for people to save for their first home – so Kiwi’s underlying affinity with home ownership doesn’t seem to be shifting, it’s just about how and when you get into the market,” says Mr Bullock.

The research found that nearly a quarter (23%) of non-property owners are planning to buy a house in another region and move there, and one in five (20%) non-property owners are planning to buy somewhere other than the region they live in and rent it out.

 “Applied to Auckland, that would mean that 300,000 Aucklanders (a city almost the size of Christchurch) are actively considering moving out – this helps to explain some of the pricing pressure throughout provincial New Zealand,” says Mr Bullock.

“Only six months ago we were talking about the impact Auckland’s housing market was having on neighbouring regions such as Waikato and the Bay of Plenty and now we are seeing this flowing into other regions further afield.”

A further 12 per cent of New Zealanders are planning to cash up and sell their house to take advantage of the high prices.

Ends

 *The BNZ Financial Futures research was conducted by Colmar Brunton, a New Zealand Market Research Company. The purpose of the research was to understand general financial behaviour and attitudes of New Zealanders, and the impact of rising house prices on attitudes to owning your own home. Online interviews were open to 18+ respondents from Friday 29 July to Monday 12 August 2016, surveying a total sample size of n=2,000.