House price expectations still firm

The latest ASB Housing Confidence survey shows that housing activity and house price expectations have increased again.

Monday, November 7th 2005, 9:32AM

The survey says the housing market has found yet another life. “Activity and expectations have ticked up again in recent months. So too have expectations of interest rate hikes. As usual, this is not an environment perceived to be in favour of buyers.”

The survey found that a net 30% of those surveyed between August and October believe house prices will rise in the next 12 months, while 15% expect price declines and 40% expect no change or are unsure.

ASB says the survey results are consistent with other measures of house prices over recent months and concludes that the upward price cycle has not ended yet but instead has probably accelerated a little.

“This price pressure - on average - can be linked back to the ongoing demand and the still limited availability of dwellings for sale - again on average.

“The level of activity remains below that of the hectic second half 2003 but, once seasonal differences are taken into account, the level of activity is near that of the busy December, 2004 –February, 2005 period.

“The demand might be coming from the private sector, owner-occupiers and investors alike, but the fuel is coming from the debt creation being undertaken primarily through the banking system.”

The survey reports that major institutions (including banks) surveyed monthly by the RBNZ increased their lending to the household sector by 15% between in the September year.

However because of the interest rate factor the survey indicates now people, on balance, do not consider now to be a good time to be buying a house. Twenty-two per cent of those surveyed in the three months to October considered it be a good time to buy a house but 27% thought it was not (28%) while 43% considered neither and 8% did not know.

The key findings of the survey are: • The housing cycle continues in its upward phase • Even late in the cycle people are still generally expectant of further imminent price increases • The market remains tight • But interest rates are increasing again • And the RBNZ are likely to tighten further • A slower housing market is still expected.

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