KEY POINTS:
There are signs New Zealand's five-year housing boom is coming to an end, with a survey out today showing Kiwis are less confident that house prices will keep rising as higher interest rates start to bite.
The quarterly New Zealand housing confidence survey by ASB bank found that fewer people believe now is a good time to buy a house and fewer than half believe house prices will keep going up.
"Price expectations are now turning down noticeably, which points to some unwinding of the recent spurt in house price growth," ASB said.
Just 47 per cent of respondents believed house prices would keep rising, compared with 61 per cent who three months ago believed house prices would keep going up.
Some 15 per cent of people believed house prices would fall, compared with just 6 per cent three months ago.
"The survey results reinforce that the housing market is likely to enter a period of slowing momentum, particularly as high interest rates start to bite into the ability and willingness of prospective buyers to finance purchases," ASB said.
ASB chief economist Nick Tuffley said the market was overdue for a correction to bring house prices more into line with incomes after strong gains over the past few years caused houses to become increasingly less affordable, particularly in Auckland.
"We'll go through a period of probably a couple of years where house prices are pretty flat - either going sideways or growing very modestly," he said. House prices may rise less than the rate of inflation, he said.
But unlike the last correction caused by fallout from the Asian crisis when the median house price dropped 4 to 5 per cent, outright falls were unlikely.
"I'm not anticipating that there are going to be any marked price falls," Tuffley said.
The strong labour market - with near record low unemployment of 3.8 per cent - should ensure that any trough in the market was "relatively mild".
New Zealand has been through an unprecedented housing boom over the past five years, with house prices rising at the fastest rate in 45 years. However, the latest data from the Real Estate Institute of New Zealand showed the national median house price had eased slightly to $347,500 in June from $350,000 in May, and that fewer properties were selling.
ASB said its survey "ties in with early signs that the recent upward momentum in the housing market is starting to turn.
"The latest survey is showing the first chinks in a strong run of confidence in the housing market that began over a year ago." According to the survey, 37 per cent of respondents believed now was a bad time to buy a place, up from 28 per cent who believed that three months ago.
Just 23 per cent of people thought now was a good time to buy, compared with 25 per cent three months ago.
The survey was conducted before Reserve Bank Governor Alan Bollard raised the official cash rate for the fourth time this year to 8.25 per cent on Thursday. Although most of New Zealand's houses are bought with fixed-rate home loans, many of those expire this year, exposing home owners to higher interest rates.
"There are early signs that these higher interest rates are reducing appetites to borrow, and we expect the impact will become noticeable over the next few months," ASB said.
Last week, Bollard indicated New Zealand's debt binge could be coming to an end and as long as borrowing continued to moderate, he would not have to lift interest rates again. "New Zealanders have been showing early signs of moderating their borrowing," he said.
New Zealand households are more indebted than ever before, according to the latest available data.
At the end of May, households owed $158 billion, up 14 per cent from $139 billion owed a year ago.
Most of the debt is made up of housing debt of $145 billion.
PEOPLE WHO BELIEVE HOUSE PRICES WILL:
Rise
Now: 47%
3 months ago: 61%
Fall
Now: 15%
3 months ago: 6%
Stay the same
Now: 33%
3 months ago: 29%
A GOOD TIME TO BUY A HOUSE?
Good time
Now: 23%
3 months ago: 25%
Bad time
Now: 37%
3 months ago: 28%
Neither good nor bad
Now: 33%
3 months ago: 41%
