ASB NZ Housing Confidence Survey

Tuesday, 15 May 2012, 9:20 am
Press Release: ASB Bank

Media release
ASB NZ Housing Confidence Survey

Tuesday 15 May 2012

Nationwide Surge In House Price Expectations As Housing Supply Tightens

• Housing confidence remains steady over early 2012
• House price expectations rose sharply across NZ, with expectations of increases moving beyond Auckland and Christchurch
• Low interest rate environment likely to underpin a gradual housing market recovery

Housing confidence remained on an even keel while house price expectations surged nationwide during the three months to April, according to the latest ASB NZ Housing Confidence Survey.

The ASB Housing Confidence Index edged up by one point over the quarter, with a net 21 percent of respondents saying that now is a good time to buy a house, compared to 20 percent in the previous quarter.

ASB Chief Economist Nick Tuffley says there has also been a nationwide lift in house price expectations. “More respondents now believe that house prices will rise across New Zealand, rather than just in Auckland and Christchurch where the housing shortage is more evident. Housing market activity has steadily picked up over late 2011 and early 2012, which is boosting price expectations, and this coupled with a lower supply of housing continues to gradually push up house prices.

“House price expectations in Auckland are now the highest since April 2007 – the last time housing market activity surged before OCR increases cooled the market. We expect house price appreciation will continue to be relatively strong in Auckland due to supply constraints.”

He says the continued lift in house price expectations in Christchurch is a clear sign that demand for housing is anticipated to continue to increase the prices of the city’s remaining housing stock. However, housing confidence in Christchurch remains fairly soft, with the low level of undamaged housing stock and widespread damage making the buying process a challenging one.

“The surge in house prices expectations nationwide may be a sign that the housing market recovery will become more broad-based in the low interest rate environment,” Mr Tuffley says. “If so, that potentially puts the Reserve Bank in a bind. At the recent April OCR Review, the Reserve Bank said that ‘should the exchange rate remain strong without anything else changing, the Bank would need to reassess the outlook for monetary policy settings’. But given signs households are once again starting to view housing as an appreciating asset, there is the risk that an OCR cut in response to continued New Zealand dollar strength could put more heat into the housing market.”

Mr Tuffley expects the Reserve Bank to remain on hold until March 2013 before raising the OCR, and further increases in the OCR are likely to be gradual. “Low interest rates will continue to underpin recovery in the housing market over the coming year, but there will come a time when interest rates return to more normal levels.”

ENDS

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