Cautious Optimism Drives Strong Housing Market
The latest ASB BANK Quarterly Housing Confidence Survey reveals an increasing majority of people expect house prices to rise while, at the same time, more people are coming to doubt that now is a good time to buy a house.
“A cautious optimism appears to exist about the housing market,” says Anthony Byett, Chief Economist, ASB BANK.
“The majority of people expect house prices to rise in the next 12 months and there are also a fast-growing proportion of people who expect interest rates to stay the same.
“These expectations are showing as strong demand for housing at a time that supply is still tight” he says.
The survey shows that on average over the December quarter, 58% of respondents believed that house prices would increase (45% in the September Quarter), 17% believed it’s a good time to buy a house (24% in the September Quarter) and 29% believed that interest rates will increase (53% in the September Quarter).
The disparity is particularly conspicuous in Auckland with an average of 64% of respondents believing house prices will increase with just 5% believing it’s a good time to buy.
“The cautious optimism revealed in the survey is a healthy sign for the housing market. It shows that the upswing in housing is not likely to become excessive and therefore end with a sudden downturn.
“The cautiousness seems to reflect a perception that the balance of power continues to swing in favour of the vendor.
“It also reflects a wider concern people have about the economy and is an acknowledgement of the current constraints such as the high levels of household debt and the low level of inflation targeted.
Mr Byett predicts that the low expectations for interest rate rises are likely to flow through to increased levels of confidence during the first quarter of 2003.
He says the issue of ‘Rotting Homes’ may also have had some effect on peoples’ perceptions, although this will be limited to specific types of homes.
generally, the situation of strong demand and limited supply
persists and the overall outlook for the housing market
remains positive. The results suggest less market volatility
than we’ve seen in previous housing cycles. 2003 has started
off on a strong note and strong activity and modest price
gains are forecast for the rest of the year.”