People still think it's a bad time to buy, although that number has dropped slightly.

New Zealanders have noticed a change in the housing market and expect house price growth to ease.



ASB has released its latest survey of housing confidence, which shows expectations for house price growth at a five-and-a-half-year low.



Aucklanders led the drop. There, only a net 15 per cent of people expected house prices to lift, the lowest percentage in eight years.



A reading of zero would indicate as many expected prices to lift as to fall.

READ MORE:

* Homeowners told 'don't panic' as Auckland house prices stall

* Auckland home likely to sell for $6 million - and then be pulled down

The fall in house price expectations was shared across the country, with fewer respondents nationally, at 32 per cent, expecting house price gains over the next 12 months, compared to 42 per cent last quarter.

SUPPLIED ASB chief economist Nick Tuffley says people tend only to think it's a good time to buy when the market is very weak.

ASB chief economist Nick Tuffley said the dip in confidence reflected the fact house sales volumes were at their lowest levels since 2014.

"The subdued sales activity has coincided with the market hitting the brakes on house price growth, with prices falling slightly in Auckland and Christchurch. In the case of Auckland, this is the first time house prices have fallen since 2010," he said.

"It makes sense that when people are hearing the market is softening, they adjust their expectation accordingly."



He said the market had been cooling in Auckland since June, which had spread to other parts of the country. "It's no surprise we've seen a turnaround in sentiment."



He said the slowdown was partly due to the Reserve Bank's new loan-to-value restrictions (LVRs) introduced last year. "We certainly think the second round of LVRs has kicked things up a gear. The 40 per cent investor threshold is making it much harder for some people to buy."

LIZ MCDONALD/STUFF The Auckland market has turned in buyers' favour, ASB says.

Interest rate hikes, which occurred around the same time, had also played a part.

"Given that market conditions are likely to remain soft over the next few quarters, we anticipate a greater drop in house price expectations in next quarter's survey," Tuffley said.

"But when we step back and take a look at the big picture, it's still one of very strong demand and limited supply. Ultimately that means upward pressure on prices will continue, just not to the same degree we've seen."

He said there was a "tug-of-war" in the Auckland market in particular, because there was not enough building happening to keep pace with population growth. But prices were stretched compared to incomes.

The survey showed respondents thought it was a bad time to buy a house - although that number had dropped slightly from the past quarter. A net -13 per cent said it was a bad time to buy, compared to -17 per cent in the March quarter.

Tuffley said buyers faced less competition in many parts of the country. "Particularly in Auckland, where there has been such a big lift in the number of properties on the market that the pendulum has really swung."

He said people tended to think it was a bad idea to buy during booms and it was not until the market was very weak that buyers rated it a good time to purchase.

Tempered interest rate expectations may have also influenced respondents' views on whether or not it is a good time to buy a house.

The majority of respondents still saw higher interest rates ahead, albeit to a slightly lesser extent than last quarter.

"On balance, respondents are likely to continue expecting interest rates to be relatively flat over the next few years as we gradually leave this period of historically-low interest rates behind us," Tuffley said.