Housing confidence edges down despite interest rate optimism

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.