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ASB Bank Housing Confidence Survey

ASB Bank Housing Confidence Survey

Fall in Expectation of Further House Price Increases

Confidence that house prices will continue to rise over the next 12 months has dropped significantly according to the latest ASB Bank Housing Confidence survey for the three months to April 2004.

A net 12% think house prices will rise in the next 12 months, compared with the average in 2003 of a net 50%. Despite this 38% drop, the figure for those who think it is a bad time to buy is holding steady at a net 18%, the same figure as the previous quarter.

ASB Bank Chief Economist Anthony Byett, believes the change in confidence in price increases serves as a reminder of the cyclical nature of housing.

“We are already seeing a rise in interest rates as the Reserve Bank shows concern over the potential for higher inflation rates in 2004 and 2005. We are also seeing the rate of net immigration slow. These factors, plus the survey results, suggest that the housing market may be peaking at present.

“The moderate nature of both the expected interest rate increase and the migration slowdown indicate that the average house price could flatten over the next two to three years, rather than decline sharply. A period akin to that of 1998-2000 – possibly slightly stronger – appears in store.

“Over the next few months we should get a clearer picture of what will happen with the market. The findings of the survey and other information in the market show that people feel that the time for a good opportunity has long passed. What we aren’t seeing yet however is a cessation in buying houses, more an increase in reservations regarding the sort of gains that have been enjoyed recently.”

Those in the South Island have the greatest reservations about buying a house, with a net 29% feeling it was a bad time to buy, versus the national average of 18%. In the previous ASB Bank Housing Confidence report it was noted that some of the greatest price gains had been recorded in the South Island, which reinforces why more caution is being displayed in this region than anywhere else.

“This latest report tells us that house prices are probably near a cyclical peak, and indicates that house buyers should be cautious,” says Mr Byett. The time for quick capital gains appears to be ending but investment in a house is generally a long term strategy. The positive long-term prospects for housing, both as an investment – and as a home – remain intact.”

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