ASB Housing Confidence Survey July 2012
House price expectations continue climbing
• Housing confidence remains steady, but Auckland has bucked the trend with a drop in confidence.
• House price expectations continue to rise in all regions and remain at elevated levels.
• Expectations of higher interest rates reduced markedly as speculation of OCR cuts peaked in May and June.
Nationwide housing confidence remained steady in the three months to July, but house price expectations continue to surge, according to the latest ASB Housing Confidence Survey.
The ASB Housing Confidence Index edged up by one point over the quarter, with a net 22 percent of respondents saying that now is a good time to buy a house, compared to 21 percent in the previous quarter. The Index has now remained stable between a net 20 and 25 percent for the last five quarters.
However, Auckland paints a different picture, with housing confidence dropping in the city during the most recent quarter. A net 12 percent of Auckland respondents say that now is a good time to buy, down from 18 percent in the previous quarter.
ASB Chief Economist Nick Tuffley says this drop reflects the relatively tight conditions in the Auckland market. “Levels of new listings and housing inventory are very low in the region, and the latest drop in confidence suggests it is increasingly becoming a seller’s market. The experience of the mid-2000’s tells us that a weak confidence reading does not imply that people don’t want to buy, just that they view market conditions as challenging from a buyer’s perspective.”
Meanwhile house price expectations continue to climb in all regions of the country. Overall, a net 51 percent of respondents expect prices to increase over the next twelve months, up from 45 percent in the previous quarter. “Price expectations remain highest in Christchurch and Auckland, which reflects the fact that supply is tightest in these two markets.”
In Christchurch, a net 77 percent of respondents expect higher prices over the next twelve months. Mr Tuffley: “Prices in the region will be pushed up further by the current shortage of habitable properties in the city. That situation will start to ease, though, as rebuilding work gets under way in earnest.”
House price inflation will be monitored closely by the Reserve Bank. However, price increases are likely to be constrained in the short term by a cautious approach to debt, weak net migration and modest employment growth. In addition, inflationary pressures in other parts of the economy remain subdued and international events continue to pose a risk to the economic outlook. Mr Tuffley expects that those factors will encourage the RBNZ to leave the cash rate on hold for the foreseeable future. “We expect the OCR to remain on hold until June 2013, with gradual increases occurring from that time. Supply constraints and the low interest rate environment should underpin a continued appreciation in house prices of around 4 percent over the next year on a nationwide basis.”
The full ASB NZ Housing Confidence Survey
report is attached, Housing_Confidence_Report_July12.pdf