- Housing Confidence increased in the April 2011 quarter
- House price expectations also on the rise
- Lower expectation of interest rate increases over the next 12 months
Housing confidence rose slightly over the three months to April, according to the latest ASB NZ Housing Confidence Survey.
The ASB Housing Confidence Index climbed two points over the quarter, with a net 29 percent of respondents still saying that now is a good time to buy a house, compared to 27 percent in the previous quarter.
ASB Chief Economist Nick Tuffley says house price expectations have also risen marginally from a net 9 percent of respondents in the January 2011 quarter that expect house prices to rise, to 11 percent this quarter. “While more people now expect house prices to rise over the next year, that sentiment remains modest by past standards,” he says. “House price expectations remain highest in Auckland, in keeping with recent housing market data which shows stronger activity in this region compared to the rest of the country.”
As can be expected, a month to month breakdown of the results shows a sharp drop in housing confidence and price expectations in Christchurch over March. While there was a considerable rebound in April, housing confidence in the region is still softer than overall confidence in New Zealand. Meanwhile, house price expectations are more resilient, with a net 9 percent of respondents in Christchurch expecting a rise in house prices over the quarter – only slightly lower than the nationwide average of 11 percent.
The survey also revealed a significant drop in the number of respondents who believe interest rates will increase over the next year. “Just over a net 35 percent of respondents now expect interest rates to rise, down from a net 55 percent in the January quarter,” Mr Tuffley says. “This is unsurprising in light of the 50 basis point decrease in the OCR in March, and the resultant lower mortgage interest rates, which have increased the appeal of housing as an investment, despite the tax changes that came into effect on 1 April.”
Recent market data has also shown tentative signs of an improvement in housing market activity. Mr Tuffley says the median number of days to sell a house has dropped to 45 days, although the measure remains above the long-term average of 38 days. “Despite renewed interest in housing, it appears buyers are still in no rush to purchase,” he says.
“We expect house prices to grow modestly at a rate of around 3 percent over the coming year. A combination of a contained level of housing inventory, positive population growth and the recent drop in interest rates will underpin a gradual recovery in underlying housing demand over the coming years,” Mr Tuffley says.