Consumer confidence sags but house price expectations rise

Friday, 28 August 2020

ANZ reiterates big “income hit” from loss of international tourism is still in front of us.

The return of Covid-19 in Auckland appears to have sapped consumer confidence, but Kiwis are upping their expectations of house price rises in the year ahead.

ANZ reported that its closely watched Roy Morgan poll showed a 4 point drop in consumer confidence in August with a net 27 per cent of consumers expecting to be better off in a year’s time.

That was down from a net 31 per cent in July.

Polling was done throughout the month, so about half the August responses were received before the new community outbreak of Covid was discovered in Auckland, and about half afterwards.

ANZ chief economist Sharon Zollner said reality was biting.

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”We’re battling Covid-19 once more, and the Auckland hospitality and retail sectors are the cannon fodder.”

Job insecurity will have increased for many as a result of the “second lockdown,” she said.

But beyond that, huge uncertainty remained with the “income hit” from the loss of international tourists still largely to come, she said.

Despite that, a net 37 per cent of people expected house prices to rise in the year ahead, up from a net 26 per cent in July.

Among the 56 per cent of people expecting house prices to rise, the average expectation was of a 2.8 per cent increase, up from the average expectation of a 2 per cent rise among the 49 per cent of people expecting prices to go in the July poll.

A net 3 per cent thought it was a bad time to buy a major household item, down 3 points, “consistent with our view that the vigorous post-lockdown bounce in retail spending has probably largely done its dash”, Zollner said.

Perceptions regarding the next year’s economic outlook fell 7 points and remained “very low at -41 per cent”.

The Government’s job was to make sure that the blow didn’t fall too unevenly, Zollner said.

“That’s made more challenging by the fact that record-low – and falling – interest rates are boosting the housing market,” she said.

“Asset price inflation is good for some, but it’s not typically going to be the people who are bearing the brunt of this economic shock.”