House buying confidence slid in the three months to October as the net percentage expecting price rises more than halved to 8% from 19% in the July quarter, according to the latest ASB NZ Housing Confidence Survey.
A net 28% of respondents said it was a good time to buy a house in the three months to October, down from net 29% the previous quarter.
A net 8% expected house prices to rise over the next 12 months, made up of 33% who see higher prices (vs 38% last quarter) and 25% expecting lower prices (vs 19% last quarter).
A net 61% expected interest rates to rise , down from a net 71% expecting interest rates to rise when the survey was last taken. Economists have been changing their view this week on when the Reserve Bank was likely to next increase the Official Cash Rate. NZIER, ANZ and BNZ now expect the next hike to happen in the June quarter rather than the March quarter. ASB has stuck with its forecast for the next hike being on March 10. See more here.
Confidence was weakest in provincial and South Island markets, but strongest in Auckland.
ASB said house prices remained relatively resilient in the three months to October because potential sellers had held off putting their house on the market in the hope that conditions would improve.
However, Realestate.co.nz figures out for the month of November showed a 7% rising seasonally adjusted listings in November and a drop in asking prices. See more here.
"While the recent decline in house prices is in line with our expectations of annual price declines of 3‐4% over late 2010/early 2011, the very low level of house sales combined with the current level of inventory presents some downside risks," ASB economists Nick Tuffley and Christina Leung said.
"Beyond early 2011, we expect house price increases to track broadly in line with inflation i.e. 2‐3% per annum," they said.
ASB view on housing market
"A number of influences are expected to constrain the housing market over the next couple of years. The announcement in the May Budget of the removal of the ability to claim depreciation will reduce rental investment demand. In addition, mortgage rates are expected to gradually rise over the year. To the extent that house prices are already high relative to incomes and rents, we expect some correction in these ratios, but mainly via growth in incomes and rents.
"There are clear signs that households are collectively ‘deleveraging’, with household debt falling relative to incomes. This reflects the fact that households are now seeking to spend within their means. Partly offsetting these effects are some factors which are supportive for house prices. We expect a recovery in employment and wage growth, which will give more households increased means with which to buy their first home or to trade up.
"Meanwhile, supply of housing is expected to remain low. This reflects both the current low number of new listings on the market and the fact that there will only be a modest level of housing construction over the next year or two. In addition, net migration shows signs of stabilising following some weak growth over the first half of this year.
"The increase in net migration in recent months has been largely driven by a rebound in the number of permanent long‐term arrivals from a broad range of regions, including Asia and Europe. We expect population growth will underpin housing demand over the coming year. The balance of these factors points to the housing market remaining soft over the next couple of years, both in terms of the pace of sales turnover and house price growth. However, there are few signs that there will be an oversupply of new housing over the next couple of years."
Here is the release from ASB:
Housing confidence has slipped, but only slightly, as house price expectations continued to fall over the last quarter, according to the latest ASB NZ Housing Confidence Survey.
ASB Chief Economist Nick Tuffley says that housing confidence was marginally lower during the three months to October, with a net 28 percent of respondents still saying that now is a good time to buy a house, compared to 29 percent in the previous quarter. This small decline occurred against a backdrop of a slide in perceptions around house prices.
“Expectations for rises in house prices have fallen across all regions except Auckland,” he says. “A net eight percent of people we surveyed across New Zealand expected prices to increase, significantly down from a net 19 percent last quarter. Auckland now has the highest price expectation across the regions.”
Countering the waning in house price expectations, the survey also shows a drop in the number of respondents who think interest rates will increase.
"Just over a net 61 percent of respondents now expect interest rates to rise, down from a net 71 percent in the July quarter,” Mr Tuffley says. “This subdued interest increase expectation would usually fuel housing confidence, but is balanced out by the fall in price expectations.”
The results are in line with recent data showing signs of a continued slow down in housing market activity.
Mr Tuffley says the median number of days taken to sell a house has continued to edge up and is now well above the long-term average.
“The fact that potential sellers still appear to be holding off putting their houses on the market is also helping mute some of the price declines.”
“We expect the outlook for the housing market will remain subdued given waning housing turnover. Beyond 2010, we forecast weak house price growth, tempered somewhat by population growth and net migration,” Mr Tuffley says.