Some softening of the conviction that further rises lie ahead compared with last year was understandable, said ASB chief economist Nick Tuffley.
"Prices have been going up strongly and this rate of appreciation can't carry on forever," he said.
"And interest rates are rising, so respondents are right to expect the market will cool somewhat."
The Real Estate Institute reported yesterday its stratified housing price index, which adjusts for variations in the mix of properties sold between one period and another, was 8.5 per cent higher last month than for April 2013. That represents a slowdown in the house price inflation from 9.2 per cent in March but still above the annual rates seen in January and February.
Tuffley said that index suggested annual house price inflation peaked at just over 10 per cent in the December quarter last year.
"But ongoing tightness in the market means upward pressure on prices is likely to continue in some areas."
Looking at the three-month moving average, annual house price inflation in Auckland remained very stable at 14 to 15 per cent, he said.
A number of factors were weighing on sentiment.
"The market is tight, prices are high, and interest rates are rising. The Reserve Bank's high loan-to-value lending restrictions are also having an impact, with activity dipping since they were introduced last October. On balance, respondents still view now as a bad time to buy a house."
A net 4 per cent of the respondents to ASB's survey consider it a bad time to buy, but that is an improvement from the net 9 per cent pessimistic in the previous survey - despite mounting expectations that interest rates will increase.
A net 70 per cent expect rates to rise, up from a net 55 per cent in the previous survey.
The dispiriting effect of the expectation of higher rates was being outweighed by some easing in the market as turnover fell while the number of listings had started to creep up.
"That whole issue of the difficulty finding the house you want is easing. Price momentum is slowing a little bit. You are still having to pounce fairly quickly and have a pretty sharp offer, but some of that tension is easing a little bit and that seems to be dominating the increasing expectations that interest rates are going to go up," Tuffley said.
Although rates were rising "you have still got fairly sharp population growth and the supply side having to do a lot of work in terms of building".
Heading higher?
*A net 48% expect house prices to increase over the next 12 months.
*A net 70% expect rates to rise, up from a net 55% in the previous survey.
*A net 4% of the respondents to ASB's survey consider it a bad time to buy.
