8 November 2004
Market entering slower stage of housing cycle
The housing market continues to slowdown in a moderate manner in keeping with previous cycles, according to the latest ASB Bank Housing Confidence survey for the three months to October 2004.
The proportion of people believing it is a good time to buy a house continues to be exceeded by the proportion who believe now is not a good time with the net percentage remaining stable at -7%.
More people now feel house prices will fall in the near term, than rise. Those surveyed showed that their confidence in further house price increases in the next 12 months has dropped with the proportion falling from a net 2% net -2%. However, amongst this group the most common response was that the expectation was for prices to stay the same (41%).
ASB Bank Chief Economist Anthony Byett, believes that the cycle the housing market appears to be entering is normal.
“As with previous cycles in the New Zealand housing market any declines look likely to be modest on average, especially against an average 52% gain in house prices over the last three years. And unlike during other cycles the economy continues to grow and no recession is expected.”
“Housing activity remains relatively high with the number of days to sell a house relatively short at a median of 31 days. It may not be at the levels of 2003, but there are still plenty of New Zealanders buying and selling homes.”
“This latest Housing Confidence Survey was carried out before the most recent official cash rate review, and indications from the Reserve Bank that further rate hikes may not be necessary. At the same time the mortgage rate market has seen competition that should benefit home buyers and owners.”
“Looking ahead, the survey results suggest a further slowing in activity is likely. Current driving forces in the market such as higher interest rates, slower population growth and a fast rising number of new dwellings coming on stream, are likely to continue to apply brakes to the market.”
“Data from other sources in the market provide little evidence of widespread house price falls. According to some measures the average price is still rising. But the trend across all house price statistics is clear – the rate of increase is slowing.”
“The cyclical change could present an opportunity for home buyers, particularly first home buyers, to enter the market in a more considered fashion. Conversely, more prudence will need to be shown by home-owners with less ability to defer sales if required. It is important to recognise that the market is cyclical and while in the housing market the seasons are longer, after winter follows spring.” South Islanders continue to be the most wary about the housing market, the proportion of the opinion that it is a good time to buy being a net -21%, below the national average of a net -7%.
Note: the reporting of the housing confidence figures has reverted to quarters ending January, April, July, and October.
Please note this release is embargoed to allow sufficient time for results to be analysed and interviews to be conducted.
Graphs: The net result is the difference between those who believe rates it’s a good time to buy and those who do not believe it’s a good time to buy. The net result is the difference between those who believe prices will increase in the next 12 months and those who do not believe prices will increase in the next 12 months.