House prices will rise
Housing confidence remained strong in the three months to October 2009, according to the ASB Housing Confidence Survey, released in late November. The survey also shows a marked shift in house price expectations.
Only six months ago the April 2009 quarter showed a net 45 per cent of respondents expecting house prices to continue to fall but in this latest survey a net 40 per cent now expect house prices to rise.
“This turnaround in house price expectations is the largest recorded shift in the survey to date”, said ASB Chief Economist Nick Tuffley.
“Lower short term interest rates and evaporating fears of further market decline have no doubt contributed to the very positive outlook for house prices”.
A majority of respondents still continue to see now as a good time to buy a house, making for nine months of optimism towards housing. However, there was a slight dip in optimism over the quarter (down to a net 48 per cent).
Survey responses also revealed a sharp lift to a net 35 per cent in the number of people who expect interest rates will rise over the next year. In keeping with the bullish sentiment towards housing, the market itself has swung firmly back to being a sellers’ market, according to the report. The median time taken to sell houses has shortened and house prices have been increasing.
However, the level of turnover has stalled at below-average levels with listing volumes not yet rallying to the previous highs.
“The housing market is showing strong signs of being constrained by a lack of available stock for sale”, said Tuffley.
“Prospective buyers are competing vigorously to quickly snaffle up the good houses that come onto the market.”
The imbalance is likely to gradually correct over the next year as demand moderates through higher interest rates and renewed emigration, and as supply starts to increase.
“Mortgage rates are likely to continue to rise over the next couple of years, dampening demand”, Tuffley predicted.
“Supply will also lift over time as higher prices entice more sellers to the market and trigger a pick-up in construction.”
“Meanwhile, house prices look set to keep rising into the new year, something that is likely to challenge the Reserve Bank of New Zealand’s resolve to keep interest rates on hold until the second half of 2010″, he concluded.