Rise in Housing Confidence

question-mark3The number of people who think the time is right to buy a house continues to increase, even as expectations that prices will keep falling start to ease.  The ASB housing confidence survey for the three months to April, published today, found 59 percent of respondents felt now was a good time to buy, up from 53 percent in the previous quarter.  ASB chief economist Nick Tuffley said that during the past nine months those surveyed had become increasingly enamoured with the housing market.

The improved sentiment appears closely linked to the dramatic fall in interest rates in the past year, Mr Tuffley said.  “Housing is a New Zealand example of ‘green shoots’. Caution over the outlook for prices and the uncertain economic environment has started to be overcome in recent months.  “The early months of 2009 have seen positive views on purchasing translate into action: sales turnover lifted sharply through to April.”  It was likely the housing market was turning the corner, but a robust recovery was another matter.

“Many long-run fundamentals for the housing market remain weak, in particular prices remain high relative to both incomes and rents despite recent price falls,” Mr Tuffley said. “The cautionary messages for prospective buyers are to be realistic about the extent of future capital gains and to make allowance for the fact that mortgage rates will be higher on average in the future than the rates currently available.”

In the latest survey, a net 45 percent of respondents expected house prices to fall in the next year, while a net 30 percent expected interest rates to fall. While expectations of lower house prices persisted in the latest quarter, month-to-month results showed a very pessimistic start to the quarter but a swing to less downbeat views by April, Mr Tuffley said. During the three month period, there were also increasing doubts that interest rates would fall further. By the end of April responses were evenly split between those expecting rates to rise or fall. “The shift is no doubt in response to the sharp jump in fixed rate mortgages at the end of March.”

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