A cooling housing market appears to have also cooled expectations for higher house prices, but the ASB Housing Confidence survey still finds the majority of respondents think now is a bad time to buy a house.
The survey, released this morning, showed fewer people expected house price increases, especially in the North Island.
However, every region registered fewer respondents expecting house price gains in the three months to January.
The survey corresponded with the significant drop in housing market activity following the Reserve Bank’s investor-focused loan-to-value ratio restrictions.
ASB chief economist Nick Tuffley said not only had the housing market data shown a fall in sales activity recently, it also suggested house price growth had slowed in several regions.
It was likely weaker market activity had impacted on house price expectations for the three months ended December.
The drop in respondents expecting house price gains was most acute in Auckland and a degree of "surely prices cannot keep rising?" might also be impacting answers, especially as average Auckland house prices reached the $1 million mark late last year, he said.
Overall, respondents believed now was a better time to buy than last quarter but, ultimately, the majority of respondents continued to think it was still a "bad time" to buy a house.
"While price expectations may have dipped, elevated house prices are now likely to be weighing on sentiment, as are the higher deposit requirements now facing many, particularly investors.
"On the other hand, higher interest-rate expectations were not necessarily worrying respondents too much yet because interest rates remain near record lows."
Recent lifts in mortgage rates appear to have respondents bracing themselves for more. While ASB expected the Reserve Bank to leave the official cash rate on hold at 1.75% until late 2018, funding pressures and offshore interest rates could result in rates creeping higher, Mr Tuffley said.
