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House buying confidence slips as expectations for prices slump in 3 months to Oct, ASB survey shows

Posted in News

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."

The full report is here.

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. 

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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19 Comments

Alex up working at

Alex up working at 1am...wow

No surprise to read confidence was difficult to find in the South island and provinces...when you see Marlborough with over 80 weeks supply of listings and you know the full impact of the vineyard problem has yet to hit...it don't look good...Trouble on the Coast and the winter storm down the bottom.......and Christchurch....still being shaken about each day.

Here's the thing...we would all be that much better off had the useless Labour govt made some effort to throttle the growth of the property bubbles, instead of encouraging them....imagine today with just 25 billion in household debts and prices no higher than 02 levels other than for inflation/dollar debasement correction...

Debasement!...yes it's the govt route to thieving without getting caught. Another 3 to 6% this current financial year.....wave your savings goodbye.....thankyou Mr Key and Mr Bollard...we know it's good for us.

Carry on folks...dump the debt and avoid the mortgage traps...look at prices fall...a normal market adjustment...the banks just hate it when this happens...the advertising mob love it when the banks hate it cos it means more business for them....

Bill has borrowed another $250oooooo this week...he needed it to pay the interest on earlier govt borrowings!.....tells you plenty about how Noddyland is being 'managed'. I wonder what will happen when Beijing tightens the screws and Jewleya learns that property bubbles really do implode....and Noddy sees commodity prices do another woopsee!

Wolly, how is the NZ

Wolly, how is the NZ government debasing our currency?

5/11 and

5/11 and 2/11

http://omo.co.nz/

Thanks AJ...I guess Hamrod

Thanks AJ...I guess Hamrod will get back to us if he has trouble.

Those pricks! They are

Those pricks! They are desperate... but in the scheme of things its less than one months government borrowing.

No Hamrod...go back and

No Hamrod...go back and scroll down to see the decline in the purchasing power of the Kiwi....30% plus every ten years....still going on today...in fact this year it will be 6%!

I suppose the 8% who say

I suppose the 8% who say prices will increase are the bankers, real estate agents and poor buggers who have their over priced homes on the market.

You're sharp this morning

You're sharp this morning WAS.

Don't forget people who

Don't forget people who accidentally ticked the wrong box.

I'm a klever guy - I bought a

I'm a klever guy - I bought a house betwen a petroll station and a subermarket. The bank and the lotto stopp is just arounnd the corner.

You just described the whole

You just described the whole of Kaikoura.....oh no wait...you left out the pub and the TAB....thought you would have been next door to the pub Walter!

I stick to the weakly lotto

I stick to the weakly lotto tiket. I cannot aford the Pub and TAB because I must pay my wife and my two kids 80 $ per weak. I also must drife to Nelson to see them every fortnight. 

,,, I also have two big 4WD

,,, I also have two big 4WD diesel and a powerfull boat to drife to my bach in the Malborrow's doing recreational work - fishing and hurting.

"Hurting" .....must be a

"Hurting" .....must be a Swiss thing...please explain!

... I mean possums, wild

... I mean possums, wild cats, mag pies, stoats, bastards and other pigs.

I think people are starting

I think people are starting to wise up, finally.

Did anyone notice on the new

Did anyone notice on the new motherherald website, on the top of the home page, there was no link to "property" .... says it all to me.   The party is well and truly over.

'8% expect house prices to

'8% expect house prices to rise' is not the same as 'a net 8% expect house prices to rise'

The way I read it is actuallly 33% expect prices to rise, v 25% who don't, therefore a net of 8%.

I personally am in the 25% camp who expect some decline and the Report finding of  a further 3-4% coming up is probably going to be pretty right (we are talking actual values, not notional values with inflation etc). But that is way off the sentiment often expressed on this site by those those who over-emphasise every negative factor they can identify but conveniently ignore the positive factors, and there are some.  Possibly those who live in the likes of Marlborough understandably have a jaundiced view based on the crash taking place there, but it is not the majority of NZ

Agree that the government borrowing is not good, but those getting welfare payments such as national super should appreciate that their payments are probably dependent on the government doing that for the time being.  Don't bite the hand that feeds you least they reduce the handout you expect/want!

Me, you are making sense, I

Me, you are making sense, I was hoping for some measured comment as you have expressed rather than the emotional clap-trap one tends to get . I've been saying for some time that it is highly interesting to read pensioner ravings about how everyone needs to do this or that, yet totally ignore that they are  recipients of a huge multi-billion handout each year, which is bad enough but also gives many NZ'ers little incentive to seriously plan and cater for their retirement. Therein lies a big problem for the future, but guess 20 years out is not something that concerns older folk.