13 February 2012

Housing optimism falls again, but price expectations move higher

• Housing confidence fell for the third successive quarter.
• House price expectations increased in most regions, with expectations of price increases now very high in Christchurch.
• Interest rate expectations were lower.

Housing confidence fell for the third successive quarter in the three months to January 2012, according to the latest ASB NZ Housing Confidence Survey.

The ASB Housing Confidence Index fell by four points over the quarter, with a net 20 percent of respondents saying that now is a good time to buy a house, compared to 24 percent in the previous quarter.

However ASB Chief Economist Nick Tuffley says that after slipping in the previous three months, house price expectations were now higher in almost all regions. In particular, there was a continued improvement in price expectations in Christchurch. “House price expectations once again rose quite sharply in Christchurch, where expectations of price increases are now the highest in the country. This suggests underlying housing demand in the region is recovering. Indeed, data for November and December 2011 show that on a seasonally-adjusted basis turnover in the Christchurch housing market rose to levels not seen since late 2009.”

However, Mr Tuffley noted that the Christchurch housing market remains challenging for the time being. “Although activity is picking up, housing confidence in Christchurch remains very low – a net 2 percent of respondents believe now is a bad time to buy a house. The buying process is complicated by the number of houses that have experienced damage of some kind, and the reduced stock of housing has created buyer competition.”

The number of respondents expecting interest rates to rise over the next twelve months fell over the quarter. “A net 44 percent of respondents now expect interest rates to rise, down from a net 57 percent in the October quarter,” Mr Tuffley says. “This isn’t surprising in light of the benign outlook for domestic inflation and concern over Europe and the global economy. These factors have reduced the chances of the RBNZ increasing the OCR any time soon.”

Recent market data continue to point to a gradual pick-up in underlying housing demand. Mr Tuffley says that while turnover continues to pick up, low levels of new listings have kept the inventory of housing at muted levels. The Auckland housing market is particularly tight, which is underpinning stronger house price appreciation in the region.

“Low levels of housing inventory have started feeding into higher prices, especially in the Auckland market. We expect this moderate price appreciation – about 3 percent a year nationally – to continue over 2012,” Mr Tuffley says.

The full ASB NZ Housing Confidence Survey report is available here.

ENDS

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