More New Zealand consumers expect house prices to rise in the next 12 months as demand spurred by record-low interest rates outstrips supply.
Sixty-four percent of respondents in an October survey expected values will increase over the next year compared with 61 percent in July, ASB Bank Ltd. said in an e-mailed report. The proportion that expects lower prices dropped to 8 percent from 11 percent.
Rising values may limit the central bank’s scope to cut rates in an economy where unemployment soared to a 13-year high and retail sales slumped last quarter. Fewer consumers expect higher borrowing costs over the next year and 42 percent predict no change, the most since 1999, the survey showed.
“This more widespread belief that interest rates will remain low could underpin demand” for houses, Auckland-based ASB Chief Economist Nick Tuffley said in the report. “Expectations of higher prices are firmly embedded.”
Tuffley is one of 13 economists surveyed by Bloomberg News last week who forecast the central bank will keep the official cash rate at a record-low 2.5 percent until at least July. Three predict a rate rise in the first half.
House prices rose 6.9 percent in October from a year earlier, the Real Estate Institute said Nov. 9. In Auckland, home to a third of the nation’s 4.4 million people, values surged 14.4 percent amid a shortage of new listings.
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