Housing confidence continues downward slide

Thursday, 6 May 2010, 11:55 am
Press Release: ASB Bank

Media release

ASB Housing Confidence Survey

6 May 2010

Housing confidence continues downward slide

Housing confidence has continued to wane over the three months to April, according to the latest ASB Housing Confidence Survey.

ASB Economist Chris Tennent-Brown says the drop in confidence reflects the cooling in housing market activity over the last six months.

“The continued slowdown in housing market momentum is likely to be driven in part by uncertainty over the proposed tax property changes flagged for the May Budget,” he says. “Until there is some certainty around these changes, we expect to see continued caution from residential property investors.”

Looming interest rate changes will also be influencing housing mark activity. “The Reserve Bank is expected to increase the Official Cash Rate over the coming months, so the majority of our respondents (64%) are also expecting higher interest rates,” Mr Tennent-Brown says.

While the expectations for house prices remain slightly positive, with 51% still expecting higher prices (61% last quarter), the survey reveals that expectations for further increases in house prices have fallen across all regions, particularly in North Island areas outside Auckland. Respondents in the South Island now have the highest price rise expectations of the three regions surveyed.

Indicators of declining housing confidence can been seen in the lower house sale numbers and increased listings compared to prior periods, with the proposed tax changes not appearing to have incited a rush to sell investment properties. “Overall it looks as though the supply of houses is more than keeping pace with the very modest turnover of house sales so far in 2010,” Mr Tennent-Brown says. “Taking these supply and demand dynamics into account, it appears the balance is now tipped slightly in favour of buyers.”

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“This compares to the previous quarter, which saw a reduced supply of new listings feeding an increased demand as the market rebounded,” he says.

“Beyond 2010, we expect to see some house price growth, but not at the levels house sellers have enjoyed in the past”, Mr Tennent-Brown says. “One positive for house prices is New Zealand’s continued population growth at the same time as new construction has gone off the boil. Despite this, house prices remain high compared to income and rents which, combined with the proposed tax changes, will impact the return on investment in housing.”

ENDS

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