Housing optimism rises as interest rate expectations fall

Monday, 30 May 2011, 10:29 am
Press Release: ASB Bank

Housing optimism rises as interest rate expectations fall

* Housing Confidence increased in the April 2011 quarter
* House price expectations also on the rise
* Lower expectation of interest rate increases over the next 12 months

Housing confidence rose slightly over the three months to April, according to the latest ASB NZ Housing Confidence Survey.

The ASB Housing Confidence Index climbed two points over the quarter, with a net 29 percent of respondents still saying that now is a good time to buy a house, compared to 27 percent in the previous quarter.

ASB Chief Economist Nick Tuffley says house price expectations have also risen marginally from a net 9 percent of respondents in the January 2011 quarter that expect house prices to rise, to 11 percent this quarter.

"While more people now expect house prices to rise over the next year, that sentiment remains modest by past standards," he says. "House price expectations remain highest in Auckland, in keeping with recent housing market data which shows stronger activity in this region compared to the rest of the country."

As can be expected, a month to month breakdown of the results shows a sharp drop in housing confidence and price expectations in Christchurch over March. While there was a considerable rebound in April, housing confidence in the region is still softer than overall confidence in New Zealand. Meanwhile, house price expectations are more resilient, with a net 9 percent of respondents in Christchurch expecting a rise in house prices over the quarter - only slightly lower than the nationwide average of 11 percent.

The survey also revealed a significant drop in the number of respondents who believe interest rates will increase over the next year. "Just over a net 35 percent of respondents now expect interest rates to rise, down from a net 55 percent in the January quarter," Mr Tuffley says. "This is unsurprising in light of the 50 basis point decrease in the OCR in March, and the resultant lower mortgage interest rates, which have increased the appeal of housing as an investment, despite the tax changes that came into effect on 1 April."

Recent market data has also shown tentative signs of an improvement in housing market activity. Mr Tuffley says the median number of days to sell a house has dropped to 45 days, although the measure remains above the long-term average of 38 days. "Despite renewed interest in housing, it appears buyers are still in no rush to purchase," he says.

"We expect house prices to grow modestly at a rate of around 3 percent over the coming year. A combination of a contained level of housing inventory, positive population growth and the recent drop in interest rates will underpin a gradual recovery in underlying housing demand over the coming years," Mr Tuffley says.

• Full Housing Confidence Survey (pdf)

ENDS

© Scoop Media

ASB Bank

Helping you get one step ahead.

In 1847, ASB opened as the Auckland Savings Bank with the pledge: 'to serve the community; to grow and to help Kiwis grow'. And that is very much what ASB is about today.

ASB is a leading provider of integrated financial services in New Zealand including retail, business and rural banking, funds management and insurance.

ASB strives to consistently provide its customers with outstanding service and innovative financial solutions. They're dedicated to providing simple financial products that allow their customers to bank with them how and when they want.

We all have our own ways to measure progress, and our own stories about the things that matter to us. Whatever way you choose to measure progress, and whatever your goals, ASB is there to help you get one step ahead.

Contact ASB Bank

• Info on - Bank Accounts
• Info on - ASB Home Loans
• Info on - ASB Credit Cards
• Link to - Mortgage Calculator
• Info on - Business Banking
• Info on - ASB Kiwisaver
• Link to - ASB Blog
• Info on - Personal Loans